Last Revised: 3/9/2011
While the idea of opening a new credit card may seem straightforward enough, once you start actively searching for a card you can quickly become overwhelmed by the hundreds of different pieces of plastic available in the marketplace.
In fact, it was this very feeling of being “overwhelmed by choice” that led me to create the GetDebit website—in particular, the personalized ranking engine.
It’s possible to whittle down the number of card offers you need to evaluate if you know what type of credit card you are looking for. The most common types are:
- Rewards Cards: These cards typically offer cash-back, miles, or points on every purchase made with the card. Rewards programs are best suited for cardholders who pay off their balances in full, every month-no exceptions! (the interest rate payments incurred, even on just 1 month out of the year, can often wipe out all earned rewards!
- Low Purchase APR Cards: These cards are for users who may sometimes have a need to carry a balance. The low APR on the card can help to significantly reduce the damage caused by higher interest-rate cards.
- Balance Transfer Credit Cards: Certain credit cards enable you to transfer balances at very low rates (or even 0% interest) for a specified period of time. These cards can be a real boon for those cardholders already carrying interest-paying balances.
To be sure, there are even more types of cards out there (business cards, student credit cards, and so on), but we want to keep this post focused. And besides, the above 3 uses are probably the most common.
Below, the editors at GetDebit have recommended a total of 4 cards across these 3 categories (we have 2 picks in the low-APR category). We hope you find them useful!
Discover Escape: One Rewards Card to Rule Them All
The Discover Escape credit card delivers in a big way. A strong sign-up bonus coupled with a very aggressive rewards system make this card one of our perennial favorites.
- 25,000 miles sign-up bonus, earned at the rate of 1,000 miles per month over a 25 month period.
- Earn 2 miles per $1 of spend, on essentially all purchases.
- The “miles” you earn are really as good as cash back, provided you travel at some point by airline, cruise, car rental, or vacation package. Your so-called miles can be applied as a statement credit (read: cash!) to any of these travel purchases made with your Escape card, provided you file for the credit within 90 days of the posting date of the travel event.
- $60 annual fee. Note this will be “paid back” by the rewards after you reach $3,000 in purchases on the card in any given year. Additionally, the sign-up bonus more than offsets this in the first 2 years.
- Discover isn’t accepted very much outside of the US. If most of your purchase activity is witihn the US, you should be OK.
A Tale of Two Stunningly Low APR Credit Cards
The trick to finding the best low APR card offer is to make the comparison apples-to-apples. For example, riddle me this: which is a better offer-card 1 which offers 0% for 12 months and then 7.9% thereafter; or card 2, which offers 0% for 18 months, and then 9.9% thereafter? Holy apples-and-oranges Batman! In order to solve this one, you need to do 2 things: 1) decide on a time-period for which you will hold/use the card; and 2) estimate the Effective Annual Rate (EAR) for that given time-frame.
Fortunately, the folks at GetDebit have done the heavy lifting for you. We actually have 2 picks for you, based on your time horizon. If you only plan on taking advantage of a low APR for around 2 years, then the Citi Diamond Preferred Card has the best EAR. If you’d like more of a long-term engagement, then the Simmons First Visa Platinum card pulls out in front. The table below highlights how the Effective Annual Rate for each card changes depending on the time-horizon:
|Card||Promo APR||Min Std APR||Max Std APR||Avg Std APR||2-Year EAR||5-Year EAR|
|Citi Diamond Preferred||0% for 18 months||11.99%||20.99%||16.49%||4.20%||12.20%|
|Simmons First Visa Platinum||None||7.25%||7.25%||7.25%||7.25%||7.25%|
You can see that the Citi Diamond Preferred Credit Card performs better in the short term due to the excellent 18-month 0% purchase APR (hard to beat that—you’ll only be paying interest for 6 months out of the 2 year period).
However, over the longer run, Simmons’ low standard APR allows the card to play catch-up, and actually overtake the Citi Diamond card.
Quick note: you shouldn’t care too much about rewards programs on these cards, since interest charges always significantly dwarf any upside from rewards. Your main goal should be to find the lowest EAR card out there for your time-frame!
Discover A Dazzling Balance Transfer Opportunity
Without a doubt, Discover has been making its presence felt in the balance transfer space with some very impressive promotional offers. The Discover More card is leading the charge.
- 18-month balance transfer offer with 0% APR during the promo period.
- 3% balance transfer fee.
- None-unless you can find another offer with no balance transfer fee. They pop up from time-to-time.
In short, the peace of mind attained by transferring interest-bearing balances to a zero interest situation for 18 months is worth it’s weight in gold. You can apply for the Discover More 18 Month Promotional Balance Transfer Offer.