The best credit card for people who pay their balance off every month
BillShrink.com lets you compare credit cards based on all your specifics (miles vs. cash, where you shop the most, etc) and tells you what the best card is for your specific habits. MOD EDIT  Looks like billshrink.com is shut down.  From their site: Dear BillShrink customer, As you may have heard, BillShrink.com was shut down on July 31, 2013.   While we’re sad to say goodbye, we hope we’ve been able to help you be   better informed and save some money along the way! The good news is   that much of the innovative award-winning BillShrink technology will   still be available via our StatementRewards platform (made available   to customers by our partnering financial institutions). Moreover, we   expect to re-launch a new money-saving service in the future. To see   more of what we’re up to, visit Truaxis.com. We have deleted your personal information as of July 31. We will   retain your email address only to announce a preview of the new tool.   If you do not want us to retain your email address, you can opt out in   the form below. This opt out feature will be available until September   31, 2013. If you have already opted out previously, you do not need to   opt out again. If you have any further questions, contact us at   info@billshrink.com. Thanks, The BillShrink/Truaxis Team The answer for this question varies from person to person. However most cards give lousy rewards percentage-wise. Take a look at where your money is being spent each month (say with a tool like mint.com), and seek out a card that rewards you in categories where you already spend a lot of money.  Many people here have suggested cards with high gas rebates, and that's great if you drive more than anything else. However, the important thing is to pick what benefits you most. "I'm not going to recommend a specific card.  New card offers pop up all the time.  My answer would be out of date in a month! As a general rule, if you pay off your balance every month, you should be looking at a cash-back or a rewards card. Cash-back cards will give you some money (say 1%) of every dollar you spend.  Some will give you larger amounts of cash-back for certain types of spending (e.g. groceries). With a Rewards card, you usually get ""points"" or ""airline miles"", which can be redeemed for merchandise, flights around the wold, concert tickets, etc. With these types of cards, it makes sense to do as much of your spending as possible with the cards, so you can maximize the benefits. Which specific card is best will depend on your shopping habits, and which bank is offering the best deal that week.  I recommend you start at http://www.creditcards.com to compare card offerings.  For cash-back cards, you can also go to http://www.creditcardtuneup.com, enter some details of your spending, and see which one will give you the most cash back." PenFed Platinum Cashback Rewards Visa Card is another good choice. Pros: Cons: The answer today is the Fidelity Rewards Amex.  This card pays the highest cash back (2%) on ALL purchases. The answer gets more complicated if you like miles, or you want to use one card for groceries and gas and another for restaurants, etc.  But the Fidelity Amex gives you 2% on everything you purchase, automatically deposited into your Fidelity account as cash (no coupons to rip off, or checks to deposit). For people who are already a Costco member. The American Express TrueEarnings Business Card is a good choice. Note: If you don't own a business, just use your name as the business. The business card is better than the regular TrueEarnings card. Pros:
I am like you with not acknowledging balances in my accounts, so I pay my credit card early and often.  Much more than once a month.  With my banks bill pay, I can send money to the credit card for free and at any time.   I pay it every two weeks (when I get paid), and I will put other extra payments on there if I bought a large item.  It helps me keep my balances based in reality in Quicken. For example, I saved the cash for my trip, put the trip on my credit card, then paid it all off the day after I got home.  I used the card because I didn't want to carry the cash, I wanted the rewards cash back, I wanted the automatic protection on the car rental, and I couldn't pay for a hotel with cash. There are many good reasons to use credit cards, but only if you can avoid carrying a balance. "Not everyone pays their balance in full every month. They may not make interest off of you or me but they do make interest off of a lot of cardholders. In many cases, the interest is variable and the larger your (running) balance, the higher your rate. If you're close to your limit and making minimum payments, you can literally take decades to pay off $2,000 or so.  Some people don't pay at all every month and end up paying late fees. Some people use their cards overseas and pay foreign transaction fees. Ever take a cash advance? Me neither but they charge you interest right away for that instead of waiting until your statement. The list of fees and charges is as long as my arm and in tiny print. That's how they make money. The points/bonus/cash back and other rewards programs are to get you in the door. It's like when you see a luxury car advertised for a ""too good to be true"" price and you get to the lot and find out that the one they are selling for that price is a manual transmission without AC or a radio, they only had one and they sold it an hour before you got there. It got you on the lot though. The rewards programs function in much the same way (minus the disappearing part), they get you interested in their offering among a sea of virtually identical products but rest assured, if the card issuers were losing money because of them, they wouldn't exist for very long." Really basic Revolving credit for individuals. Use a credit card to pay for a purchase. You pay the card off completely before you pay interest and get 30 days free money. Your cash balance is for that 30 days doing you some good instead. "First I want to be sure Op understands how ""Credit Utilization"" is scored as this confuses many folks here in the US.  There is no ""reward"" for charging money or carrying balances, only penalty.  If you have one credit card with a $10,000 limit and owe $8,000  you have an 80% utilization which will signal to banks that you are having financial difficulties.  (Anything over 30% on a single card is usually penalized significantly.)  The ideal utilization is something around 0, which is in the ballpark of the 5% Op mentioned.  Again there is never any direct benefit to your credit of spending a penny on any of your credit cards.*   Banks offer the best rates to people that pay off their balances each month or don't use their cards in the first place.  Why? Despite the system being imperfect in many ways, utilization is a good indicator.  Example: If you have a card with a  $10,000 limit and pay it off every month that speaks to you being a good risk. If you compared this person to the person above, who do you think would be the most likely to pay back a car loan? Finally, Utilization is a small part of the credit score.  I would call it more of a ""hurdle"" than a factor, at least concerning good rates and approvals.  Most of your credit, is based on length of history, paying on time, and having multiple types of credit. Real life example: I had a relative that had perfect payment history for decades.  They got divorced and started accumulating a balance.  The person got other cards with 0% apr to avoid the interest, but their balance only grew.  -They had to use the card to make ends meet, etc.  (3 kids, single parent)  They ended up filing a sizable bankruptcy a few years later.  This was one of the most responsible people I've ever known.  (Yes that statement will seem far fetched to someone else.  It was almost impossible to get them to file bankruptcy, even though there was no way to ever pay the money back.) The point?  Utilization shows a more 'current' picture than some of the other portions due.  -  Had those banks used the high utilization as a warning sign they would have saved a lot of money.   A 'fun' way of looking at credit: Sometimes I describe credit score as a popularity contest.  If you really 'need' money banks are not going to help you.  However if your credit shows everyone is lining up to loan you money, other banks are going to want in too.  ""Banks only make loans to people that don't need them."" *** Spending a lot on Credit Cards does sometimes have the indirect effect of getting balance increases that could have a slight increase in your score.  This happens  less than it did prior to the financial fiasco.  Also the effect of this is on the score negligible unless carrying a balance.  ( And the person carrying a balance also has a lower score anyways.)  Additionally someone charging less could probably get a similar raise if they asked for it.  (Raises vary greatly by issuer.))" "Note: this answer is true for the UK, other places may vary. There are a couple of uses for credit cards.  The first is to use them in a revolving manner, if you pay off the bill in full every time you get one then with the vast majority of cards you will pay no interest, effecitvely delay your expenses by a month, build your credit rating and with many credit cards you can also get rewards. Generally you should wait until the bill comes to pay it off. This ensures that your usage is reported to the credit ratings agencies. In general you should not draw out cash on credit cards as there is usually a fee and unlike purchases it will start acruing interest immediately. The second is longer term borrowing. This is where you have to be careful. Firstly the ""standard"" rate on most credit cards is arround 20% APR which is pretty high. Secondly on many cards once you are carrying a balance any purchases start acruing interest immediately. However many credit cards offer promotional rates. In contrast to the standard rates which are an expensive way to borrow the promotional rates often allow you to borrow at 0% APR for some period. Usually when it comes to promotional rates you get the best deal by opening a new credit card and using it immediately.  Ideally you should plan to pay off the card before the 0% period ends, if you can't do that then a balance transfer may be an option but be aware than in a few years the market for credit cards may (or may not) have changed. Whatever you do you should ALWAYS make sure to pay at least the minimum payment and do so on time. Not doing so may trigger steep fees, loss of promotional interest rates. There is a site called moneysavingexpert that tracks the best deals." "Some features to be aware of are: How you prioritize these features will depend on your specific circumstances.  For instance, if your credit score is poor, you may have to choose among cards you can get with that score, and not have much choice on other dimensions.  If you frequently travel abroad, a low or zero foreign transaction fee may be important; if you never do, it probably doesn't matter.  If you always pay the balance in full, interest rate is less important than it is if you carry a balance.  If you frequently travel by air, an airline card may be useful to you; if you don't, you may prefer some other kind of rewards, or cash back. Cards differ along numerous dimensions, especially in the ""extra benefits"" area, which is often the most difficult area to assess, because in many cases you can't get a full description of these extra benefits until after you get the card.  A lot of the choice depends on your personal preferences (e.g., whether you want airline miles, rewards points of some sort, or cash back).  Lower fees and interest rates are always better, but it's up to you to decide if a higher fee of some sort outweighs the accompanying benefits (e.g., a better rewards rate).  A useful site for finding good offers is NerdWallet." Credit cards come with an interest-free grace period of ~25 days as long as you pay your balance in full every month. In other words, charges made in January will appear on a bill cut on Jan 31, and due around the 25th of February. If paid in full by 2/25, there's no interest. It is a very good idea to get in the habit of paying off your entire balance every month for this very reason. Don't buy anything you can't afford to pay for at the end of the month when the credit card bill is due. You'll avoid interest charges, build good habits, and improve your credit score. By just paying the minimum amount due, you'll be charged interest from the moment of purchase, and the grace period on new purchases goes away. Credit card companies make the minimum amount due relatively low as a way to encourage you to pay more and more in interest every month. Don't fall for it! Look for a credit card with zero annual fee. Sure, rewards are nice, but it's more important to avoid fees, keep the interest rate low, and get in the habit of paying in full every month, in which case the interest rate won't matter. Your bank or credit union is a good place to start looking. Carrying a small balance is generally better for your credit score that paying off in full every month by virtue of the statistics and models that give you a credit score for a certain product. Banks don't want to lend to customers that aren't going to be profitable, in my experience customers who can show that they have credit over time are generally awarded a higher score. So my advice would be to keep a small, manageable balance on the credit card, paying off the balance and then spending a little again on the card to keep at roughly constant balance. This revolving credit is the purpose of the product, and by showing you can use it sensibly, you will be rewarded over time. Source: I build credit scoring models for a big UK lender, specialising in credit cards and personal loan modelling. Always pay on time, and stop listening to whoever is telling you not to -- they are clueless. Credit cards are revolving accounts with a grace period. The balance owed is due on the statement date, and you have a grace period of 20-40 days to pay.  Paying bills on time is the single most important thing that you can do to have a good credit score. Always pay on time. Technically, yes but, in practice, no.  I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off.  In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me.  I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank. I too was very confused when I tried to be tricky and paid down my balance BEFORE the bill date. I thought this would be a great thing because it would show my utilization near zero percent. The opposite happen, it dropped my credit score from 762 to 708. Here is the best example I can come up with when it comes to utilization. Lets pretend you are an insurance company and you trying to figure out who are the best risk drivers. The people that drive 10% of the day are a better risk than the people that drive 50% of the day. The people that drive 50% of the day are a better risk than the people that drive 90% of the day. Here is the rub when people drive 0%. When you look at the people at 0% they appear to be walking, busing or flying. What they are NOT doing is driving. Since they are not driving (using Credit) they are viewed as POOR drivers since they are not keeping up on their driving skills. (Paying bills, watching how they spend, and managing their debt). So, now before the billing date I pay down my balance to something between 5 to 10% of my utilization. After the bill is issued, I pay it off in FULL. ( I am not going to PAY these crazy interest rates). What shows up on my credit report is a person that is driving his credit between 5 and 10% utilization. It shows I know I how to manage my revolving accounts. I know it's dumb, you would think they reward people that have zero debt, I don't hate banks I hate the game. ( I do love me some reward points =)) "Curious, why are you interested in building/improving your credit score? Is it better to use your card and pay off the bill completely every month? Yes. How is credit utiltization calculated?    Is it average utilization over the month, or total amount owed/credit_limit per month? It depends on how often your bank reports your balances to the reporting agencies. It can be daily, when your statement cycle closes, or some other interval. How does credit utilization affect your score?  Closest to zero without actually being zero is best. This translates to making some charges, even $1 so your statement shows a balance each statement that you pay off. This shows as active use. If you pay off your balance before the statement closes, then it can sometimes be reported as inactive/unused. Is too much a bad thing?  Yes. Is too little a bad thing? Depends. Being debt free has its advantages... but if your goal is to raise your credit score, then having a low utilization rate is a good metric. Less than 7% utilization seems to be the optimal level.  ""Last year we started using a number, not as a recommendation, but as a fact that most of the people with really high FICO scores have credit utilization rates that are 7 percent or lower,"" Watts said. Read more: http://www.bankrate.com/finance/credit-cards/how-to-bump-up-your-credit-score.aspx Remember that on-time payment is the most important factor. Second is how much you owe. Third is length of credit history. Maintain these factors in good standing and you will improve your score: http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx" Some years ago a call center operator told me a bit more than they probably should have.  They like to see a lot of money go through the card, but very little staying on the card. Yes, they make money on the interest but one card defaulting blows away the profit on a lot of other cards. The 3% take from the merchants is both reliable and up-front, not 6 months down the line when (and if) you pay the interest. So if you want to make your credit card company happy, pay your bills in full every month. I have credit far beyond my actual means because I run work expenses on my personal card, I was told they didn't care (and had already guessed) that it wasn't my money. The point was I was handling things in a way they liked. Not quite at Palladium status, but cards with $200 annual fees are mine for the asking, and I haven't paid interest since the early 1990's. I think you got the message mixed up a little: Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month.   What's typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements. (That doesn't mean paying off your balances each month isn't financially smart -- it is -- just that the credit scores don't care.)   You typically can increase your scores by limiting your charges to 30% or less of a card's limit. -- from 7 Ways to Fix Your Credit Score In other words, ALWAYS pay off your balance if you can. But don't fill up your card to the max of your credit limit each month. i.e. if your credit limit is $5000, only spend $2000 each month. 1. you want /r/personalfiance  2. 1 payment or 4-5 makes no difference 3. what makes the difference are a) interest rate b) pay as much as possible every month 4. pay as much as you can into the credit card with the highest interest rate, and the minimum payment on the rest; as you pay off a credit card, make as big of a payment to the one that has the highest interest rate 5. stop charging anything on any credit card and stop getting into any kind of debt 6. as you pay off a credit card, call the company and cancel it.