It’s been a unique year, to say the least, and out of all the things that are different for us, our credit card needs are just one more item on the list. Many of us may have completely scaled back travel, while others may have almost completely slashed unnecessary expenses — so cards that earned travel rewards, or cash back on entertainment expenses, for example, are no longer serving our needs.
No matter what changed for you in 2020, the New Year is a great time to be making the smartest financial decisions possible, and while that always starts with having a budget, credit cards are an incredibly important part of the picture. “There are hundreds of credit cards on the market and choosing the right one can be confusing and overwhelming,” says Bill Hardekopf, senior industry analyst with CardRates.com. “But it’s important to thoroughly research the rates, fees and rewards of each card you’re considering so you make a wise selection.”
U.S. News & World Report recently released their report on the Best Credit Cards of January 2021. The report studied which cards earned the highest average scores in their respective categories, including rewards rate, sign-up bonuses, introductory and ongoing APRs, and annual fees, to name a few. “We used a very stringent system to come up with the award winners,” says Beverly Harzog, credit card expert and consumer finance analyst for U.S. News and World Report. “People have different needs for credit cards, and we have picked some terrific cards in each category.”
1. Best Credit Card for the New Normal & Best Cash Back Credit Card – Chase Freedom Flex
This year’s top ranked card (The U.S. News and World Report Editor’s Choice card) is so ranked because of its benefits during an uncertain economy. People have been spending their money differently this year, and the regular and revolving rewards of this card recognize this change.
- Get 5% cash back on grocery store purchases on up to $12,000 spent in the first year.
- Earn 3% on takeout and delivery services.
- Earn 5% cash back on up to $1,500 in quarterly revolving categories on things like Amazon.com, Whole Foods and Walmart.
- Get 5% cash back on travel purchased through Chase Ultimate Rewards.
- Get 3% on drugstore purchases and 1% on everything else.
Sign-Up Bonus: You can get a $200 bonus if you spend $500 on purchases within the first three months of opening your account.
Interest Rate: 0% intro rate for 15 months. After that, it’s a variable 14.99% to 23.74%, based on your creditworthiness.
Annual Fee: None
2. Best 0% APR Credit Card & Best Balance Transfer Credit Card – Citi Diamond Preferred Card
This can be a good card to get to help you pay off debt with a balance transfer, or purchase something that you can’t afford to pay off now (but know that you will be able to in the next 18 months).
- You get a 0% intro APR on balance transfers for 18 months.
- You get a 0% intro APR on purchases for 18 months.
- The balance transfer fee is either $5 or 3% of the amount of each transfer, whichever is greater.
Sign-up Bonus: None
Interest Rate: After the intro period ends, it’s a variable APR of 14.74% to 24.74%, based on your creditworthiness.
Annual Fee: None
3. Best Airline Credit Card – Chase Sapphire Preferred Card
If you know travel is in your future for 2021 (the vaccine is almost here, after all!) a rewards card with a travel focus may still be right for you. Also, many airline cards (including this one) have pivoted to offer rewards beyond travel, including deals for rental cars, hotels, and other purchases.
- Two points per dollar spent on travel and dining, takeout, and eligible delivery services.
- A DashPass from DoorDash, waiving the delivery fee when your orders exceed $12.
- Two points on up to $1,000 per month on groceries from now through April 30, 2021, including eligible pickup and delivery services.
- Get 25% more value on travel purchased through Chase Ultimate Rewards.
- Earn five points per dollar on Lyft rides.
- Get one point per dollar on everything else.
Sign-Up Bonus: 60,000 bonus points after you spend $4,000 on purchases within the first three months of opening your account.
Interest Rate: A variable 15.99% to 22.99%, based on your creditworthiness.
Annual Fee: $95 per year
4. Best Rewards Credit Card & Best Travel Rewards Credit Card – Capital One Venture Rewards Credit Card
This card offers a simple and straightforward rewards program, earning you rewards in miles. If you won’t be traveling for a while and you want another way to redeem your rewards, this card allows you to redeem your miles for a statement credit.
- Two miles per dollar spent on every purchase.
- Unlimited rewards.
- Up to $100 credit for Global Entry.
Sign-Up Bonus: Earn 100,000 bonus miles when you spend $20,000 on purchases within the first 12 months of opening your account. Or earn 50,000 miles if you spend $3,000 within the first three months.
Interest Rate: A variable 17.24% to 24.49%, based on your creditworthiness.
Annual Fee: $95 per year
5. Best Business Credit Card – Ink Business Cash Credit Card
This is a great card if you have a small to medium size business (side gig gals who have officially incorporated, we’re looking at you!) This card can provide you with a number of good management tools while saving you money on some of your regular business expenses.
The cash back is earned as points, with $1 being equal to 100 points for these rewards:
- You get 5% cash back per dollar of the first $25,000 spent during your account anniversary year in these categories: office supply stores and internet, cable and phone services. (Basically, you’re getting an additional 4% cash back on top of the 1% rewards earned on each purchase.) After $25,000 on these categories in each account anniversary year, you go back to earning 1% cash back for every dollar spent.
- You’ll earn 2% for each $1 of the first $25,000 spent each account anniversary year on the following categories: gas stations and restaurants. After $25,000 is spent in these categories each account anniversary year, you then earn 1% cash back for every dollar spent. There’s no limit on rewards.
- You earn 1% on everything else.
Sign-Up Bonus: You can get a $750 cash rewards bonus if you spend $7,500 on purchases within the first three months of opening your account.
Interest Rate: 0% intro rate for the first 12 months. After that, it’s a variable 13.24% to 19.24%, based on your creditworthiness.
Annual Fee: None
6. Best Student Credit Card – Bank of America Cash Rewards Credit Card for Students
This card offers a little bit more flexibility than a traditional card, which makes it a great option for students.
- Earn 3% cash back in a category of your choosing. Category examples: gas, dining, drugstores and online shopping.
- Get 2% cash back on groceries and wholesale clubs.
- Get 3% and 2% cash back applied to up to a combined total of $2,500 per quarter.
- Earn 1% on everything else.
Sign-Up Bonus: A $200 cash rewards bonus if you spend $1,000 on purchases within the first 90 days of opening your account.
Interest Rate: 0% intro rate for 12 billing cycles. After that, it’s a variable 13.99% to 23.99%, based on your creditworthiness.
Annual Fee: None
No matter what’s in your wallet, Harzog cautions against ever carrying a balance on a credit card — especially if you’re carrying that balance to earn rewards. The rewards you earn will never (ever) outpace what you spend on interest. Plus, rewards cards often have higher APRs, which means you can get into trouble with them even faster than with a traditional card if you’re not careful.
“Depending on how they are used, credit cards can be the best or worst way to make a transaction,” Hardekopf says. “Choose a rewards card that fits with your purchasing patterns. Take a look at what you’ve charged on your card for the last year to see the categories where you’ve spent the most money. Then select a card that maximizes the rewards for these categories.”
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