How to pick the best unsecured credit cards
The best credit cards offer things like cash rewards, double cash back on eligible purchases, low intro APR on balance transfers, and instant approval (to make your life easier).
Picking the best unsecured card boils down to figuring out which card offers benefits that are right for you. For one person, that may mean earning enough airline miles to travel to a warm island once a year. For another, it may be getting enough cash back to pay for their kid's sports league.
Give these steps a try to help narrow down your options:
- Decide what's important to you. Is it travel miles, cash back at the places you shop most often, or rewards that allow you to splurge on items you might not normally buy?
- Discover which cards offer those headline features.
- Look at perks. Once you've identified a few cards offering the features you want most, check out associated perks. This is where things like roadside assistance, purchase protection, and cash at checkout come into play.
- Learn what your interest rate will be. Ideally, you want to pay off your credit card in full each month, or at the very least, get a credit card with a good APR that won't keep you trapped in a circle of debt. If you're applying for a card for the first time, request that the card issuer "prequalify" you. Let them know you want a soft credit pull (that won't hurt your credit). Once prequalified, pay special attention to the APR (this is the interest you'll pay) and the credit limit. If the APR is high or the credit limit doesn't meet your needs, it's okay to move on to the next card. If both the APR and credit limit are satisfactory, you'll proceed to the full application.
Unsecured vs. secured credit cards
An unsecured credit card company takes you at your word that you'll repay any money borrowed on the card. You'll pay the annual fee (if there is one) and otherwise live up to your obligation. If you have a poor credit score, though, the credit card company is less likely to trust you to repay charges made to the credit card.
That's where secured credit cards come in. With a secured card, you make a security deposit and that deposit becomes your credit limit. Say you deposit $1,500. You can spend until you reach the $1,500 credit line.
The primary appeal of a secure credit card is building credit by making regular, on-time monthly payments to the company that issued the card. Each time you make a payment, it's reported to a major credit bureau and becomes part of your credit report.
As you repay the debt, your payment history is enhanced and your credit score rises. While you'll need to look out for card issuers that charge exorbitant fees and a high interest rate for using one of its secured credit cards, it is a legitimate way to build credit. As far as the credit bureau is concerned, you're repaying regular credit card debt as agreed.
There is no minimum credit score required to open a secured credit card since they're designed specifically for people with poor or no credit.
What credit score do you need for an unsecured credit card?
Consumers with scores from fair to excellent credit can qualify for an unsecured credit card. What you'll find is that people with higher credit scores tend to be offered the most attractive deals.
FICO® Score of 580 to 669
Since your credit score is in the fair credit range, you may have access to a limited number of cards, but:
- You will pay a higher interest rate than cardholders with a higher credit score
- Your credit limit may be low
- Your card may not offer great perks
FICO® Score of 670 to 739
You will have more options from which to choose, but:
- You will pay a higher interest rate than borrowers with a higher score
- Your credit limit may still be too low for your liking (although you'll have the chance to increase your limit with regular, on-time payments)
- Your card may include a few perks
FICO® Score of 740 to 799
There are many credit card options available to you, and:
- You should have little trouble landing a card with a relatively lower interest rate
- Your cards may have high credit limits
- Cards available to you are likely to offer rewards and perks
FICO® Score of 800 to 850
Your excellent credit qualifies you for the best in credit cards, and:
- Your credit limits may be high due to your near-perfect credit score
- You'll have access to the lowest interest rates
- Your cards are likely to carry the most valuable rewards and perks
FICO® Score below 580
If your credit score falls below 580, you may have a tough time qualifying for an unsecured card. All hope is not lost, though. Anyone can build (or rebuild) their credit score. Here's how you can start today:
- Take the time you need to boost your credit score by checking your credit report for errors. Report any mistakes you find to the credit bureau in question. They have 30 days to prove they're right or to remove the information from your credit report.
- Pay down debt.
- Continue to pay all bills on time.
- Take a look at Experian Boost. It's a free service that reports your on-time payments on utilities, streaming services, and cellphones to the credit bureaus.
And remember, the best secured credit cards offer relatively low fees and help raise your credit score.
Can an unsecured credit card help build credit?
Each debt you take on, including an unsecured credit card, can help you build credit. Paying a credit card on time each month (or paying it in full and avoiding interest payments) boosts your score. Whether you have a personal credit card or a business credit card, using less than 30% of the credit you have available to you also enhances your score.
The trick is to choose cards that reward you for being a responsible cardholder and making good credit a priority as you utilize the benefits offered by the cards you hold.
What you will find about each of the cards on our best-of list is that they offer real-life rewards. As long as you pay off the balance each month (or keep your balances as low as possible) you can come out ahead by gaining more in rewards than you pay in fees and interest.
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