Yellowstone Financial, Inc.

Your Best Credit Card

If you’re reasonably creditworthy, offers for new credit cards may constitute a significant percentage of your mail volume.  The thick envelopes come with “invitations” to a lifestyle filled with visions of travel for free and access to sold-out concerts and events.  But once we get past the marketing fluff, what’s the best card for you?

As you might expect, the answer is “it depends.”  Are you carrying a balance or not?  Do you care about travel or are you more interested in cash rewards?  Are you in tune with your credit card bonus categories that you know to reach for one card when you’re getting gas, and another for groceries?  While I won’t be able to recommend the absolute best credit card for everyone, the cards below are among the best.

Your Best Credit Card May Be None At All.  If you’re consistently running a balance on your credit card or are behind on your savings goals, perhaps the best step to turn your finances around is to leave your credit card at home.  This goes for having Apple Pay and other cell phone payment schemes as well.  A landmark MIT study measured the propensity to spend when using a credit card versus cash.  Those who were using credit cards spent about twice as much as those with cash.

I call it the proxyfication of payment.  Any time a vendor accepts payment in a form other than cash, your likelihood of spending more than you should goes way up.  Credit cards, debit cards, casino chips, Disney MagicBands, Apple Pay, and the Starbucks App are all examples of cash proxies.  Any time a vendor makes it easier to pay, know that you’re more likely to spend more than you intend.

Cash Reward Cards Are the Best Option for Most.  While historically there’s been a focus on airline miles for credit card rewards, your best choice may be a simple cash rewards credit card.  We’ve seen a rapid depreciation in the value of airline miles over recent years, with less award seat availability at the lower point categories.  Some airlines are not even making their award charts public, such as Delta, meaning the value of your miles can change without notice.

Fidelity was one of the first institutions to reach the two percent cash reward threshold and now offers it through their Signature Visa card.  With no annual fee, the card deposits two percent of your charges into a Fidelity account of your choosing.  The Citi Double Cash MasterCard returns cash back at one percent of your new charges, and another one percent as you pay those purchases for an effective total of two percent.  With no annual fee and the ability to apply the reward to your balance, this card is hard to beat for those who do not carry balances.

If you’re looking for a more customized analysis of your perfect card, try and enter in your monthly spending.  It will spit back the best card for you.

Carry a Balance?  Look for Low Interest Rates.  There is no level of credit card rewards that will adequately compensate you if you’re carrying a balance on your credit cards.  My advice to leave the cards at home comes into play here as the only acceptable balance for a credit card over the long term is zero.

But if you’re now looking to pay the balance down, more than anything you need to find a card with a low interest rate.  Credit unions seem to be the best bargain in this category.  Local Premier Members has a 6.99 percent APR offer on balance transfers until you pay them off with no transfer fee.  This a wonderful deal, but you may want to put the card away once you transfer your balance as new charges will be subject to a higher interest rate.  Local Elevations offers a Visa with an APR as low as 8.74 percent, and PenFed has similar rates with better awards. While temporary 0 percent interest offers are enticing, look instead for a low interest rate that will endure.  Home equity lines of credit are another option to pay off credit cards, but be careful that you’re not finding an easy way to continue to live beyond your means.

College Cards.  The time has long since past when banks tossed around credit cards to incoming college freshmen like candy.  Many college students graduated with more credit card debt than student loan debt.  Seems like a quaint vestige of yesteryear, doesn’t it?  College credit cards are still available to students who have turned 21 that are easier to get than once you’re in the workforce.  I recommend that you secure one or two college cards when you turn 21, and then use them sparingly and responsibly.  You’ll be making the first steps toward building the credit you need in order to achieve your financial objectives.  Elevations offers a BuffOne Visa with no annual fee that you should consider.