Our top picks of timely offers from our partnersMore details
Terms apply to American Express benefits and offers. Visit americanexpress.com to learn more.
Credit card applications plummeted last year amid the nationwide shutdowns due to the Covid-19 pandemic.
But data from the second half of last year shows that we are on our way to getting back to normal, at least for anyone looking to sign up for a new credit card.
Consumers are approaching the pace of loan activity that existed pre-pandemic, according to TransUnion's Q1 2021 Industry Insights Report. The report found that credit card originations had risen to 12.3 million in July through September 2020, and reached 15.5 million in October through December 2020 — a considerable increase from the lows we observed in April through June 2020 of 8.6 million.
"In the second half of 2020, lenders began to provide greater access to credit, leading to consecutive quarters of growth for new accounts," Paul Siegfried, SVP and credit card business leader at TransUnion, tells Select.
While credit card originations have gone up quarter over quarter, they are still down year over year. At Q1 2021, originations totaled 15.5 million, which is slightly lower than the 18.9 million originations in Q1 2020.
As the country continues to reopen, however, experts at TransUnion expect the demand for new credit to get even higher.
"With life returning to a sense of normalcy, consumer spending is expected to resume and be more in line with pre-pandemic levels," Siegfried says. "As a result, card issuers will look to reestablish growth strategies across their portfolio."
When it comes to picking out your next (or first) credit card, there are countless options out there. To make your search easier, Select shopped around for the best credit cards that can help you build credit, save on interest charges and earn you over $2,000 in cash back over five years. (See our methodology for more information on how we choose the best cards.)
Whether you're an avid credit card user or just starting out, here are a handful of our top-rated picks:
- Best cash-back credit card: Chase Freedom Unlimited®
- Best travel credit card: American Express® Gold Card
- Best balance transfer credit card: Citi Simplicity® Card
- Best secured credit card: Discover it® Secured Credit Card
- Best for building credit: Petal® 2 "Cash Back, No Fees" Visa® Credit Card
Check out our complete list of the best credit cards to learn about these cards and more.
To determine which cards offer the best value, Select analyzed 234 of the most popular credit cards available in the U.S. We compared each card on a range of features, including rewards, welcome bonus, introductory and standard APR, balance transfer fee and foreign transaction fees, as well as factors such as required credit and customer reviews when available. We also considered additional perks, the application process and how easy it is for the consumer to redeem points.
We also estimated how much the average consumer would save over the course of a year, two years and five years, assuming they would attempt to maximize their rewards potential by earning all welcome bonuses offered and using the card for all applicable purchases. All rewards total estimations are net the annual fee. Our final picks are weighted heavily toward the highest five-year returns, since it's generally wise to hold onto a credit card for years. This method also avoids giving an unfair advantage to cards with large welcome bonuses.
For balance transfer cards, we used a Bankrate calculator to tally the interest rates and fees you could incur if you transferred $6,028, the average balance Americans carry on their credit cards in 2019, according to Experian.
If the average consumer with a $6,028 balance on their credit card pays $200 each month, they will spend $1,911 in additional interest, assuming the average 17.7% APR. And it will take them 40 months — more than three years — to pay off that debt.
With four of the five cards featured on this list, if you take full advantage of the intro APR period and pay $200 per month, you'll pay less than $450 in interest and cut your repayment time in half to 20 months. That's a significant savings.
For the cards that offered a rewards program, we also estimated how much cash back you might earn over a five year period. Select teamed up with location intelligence firm Esri. The company's data development team provided the most up-to-date and comprehensive consumer spending data based on the 2019 Consumer Expenditure Surveys from the Bureau of Labor Statistics. You can read more about their methodology here.
Esri's data team created a sample annual budget of approximately $22,126 in retail spending. The budget includes six main categories: groceries ($5,174), gas ($2,218), dining out ($3,675), travel ($2,244), utilities ($4,862) and general purchases ($3,953). General purchases include items such as housekeeping supplies, clothing, personal care products, prescription drugs and vitamins, and other vehicle expenses.
Select used this budget to estimate how much the average consumer would save over the course of a year, two years and five years, assuming they would attempt to maximize their rewards potential by earning all welcome bonuses offered and using the card for all applicable purchases. All rewards total estimations are net the annual fee.
It's important to note the value of a point or mile varies from card to card and based on how you redeem them. When we calculated the estimated returns, we assumed that cardholders are redeeming points/miles for a typical maximum value of 1 cent per point or mile. (Extreme optimizers might be able to achieve more value.)
When choosing the best balance transfer card, we focused on the card that provides consumers with the cheapest way to pay off their debt rather than the number of rewards they could potentially earn. When you're in credit card debt, your primary focus should be repayment. Earning rewards should be seen as a bonus, and you don't want to spend beyond your means in order to earn points.
The five-year rewards total and the interest rate and fees estimates are derived from a budget similar to the average American's spending and debt. You may earn a higher or lower return depending on your spending habits.
Information about the Citi Simplicity® Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
For rates and fees of the Discover it® Secured Credit Card, click here.
Petal 2 Visa Credit Card issued by WebBank.