We score each attribute on a scale of 0 to 5. We then weight these scores to determine the star ratings you see on our review pages. The following elements are generally ordered from highest to lowest in how heavily they factor into our overall evaluation of credit cards.
The Cost of a Credit Card
With credit card debt reaching an all-time high of $1.09 trillion in 2019, we believe you should know the cost of using cards and carrying a balance. Because of that, we heavily weight a card’s annual percentage rates (APRs) and fees in determining its overall score.
Fees
Every credit card has fees, but the big one most people want to avoid is the annual fee. The higher a card’s annual fee, the lower we score it, because a card with no annual fee is the easiest to manage. When scoring a card’s annual fee, we look at the three-year average cost, to account for cards that waive the annual fee the first year your account is open. We also knock cards for having a high number of overall fees, which could include any of the following:
Interest
Most people don’t open a credit card with the intention of going into debt, but a massive amount of people end up in that situation. Given that credit card interest also compounds—you owe interest on interest—when you don’t pay your whole bill, the cost of credit card debt can really add up. That’s why we give a credit card’s regular purchase APRs significant bearing on the card’s overall score. We also look at other common APRs, including penalty APR, introductory purchase APR, balance transfer APR (intro and ongoing), and cash advance APR. The high end of a card’s APR range determines its score in this category, given that only people with the best credit scores qualify for the lowest rates. The higher the APR, the lower the score. Promotional Financing When scoring promotional financing rates (e.g. 0% APR on purchases for 15 months), we look at three things: Lower rates, longer promotional periods, and cards without deferred interest receive the highest scores.
The Value of Rewards
Rewards are perhaps the most attractive and most difficult quality to assess when evaluating credit cards. Most people want to take advantage of credit card rewards, but about one-third of people with these cards don’t know how to best use them, according to Bankrate.
Earning Points, Miles, and Cash Back
Credit card rewards values vary widely. To simplify the problem, we built a system that fairly compares rewards and gives them a dollar value. We start by looking at a card’s rewards earnings rates (the number of points or miles you earn per $1 spent in a certain category). Scores depend on the card’s highest rewards earning rate—the higher it is, the better the score. To evaluate the rewards earning rate, we also factor in how many rewards tiers a card has. Because earning rewards becomes more complicated with multiple categories to keep track of, cards with fewer rewards tiers receive higher scores. Our methodology also favors consistency: Cards with limits on how much you can earn (e.g., 6 points per $1 spent on up to $6,000 in purchases each year) and rotating rewards categories (e.g., 5% cash back on groceries in the first quarter) get lower scores in this area.
Redeeming Rewards
We then consider the ways you can use rewards, which could include the following redemption options: We give higher scores to cards with more redemption methods. However, this doesn’t have a significant bearing on scores, because not all redemption methods have the same value. In order to accurately compare rewards programs, we calculate their rewards-to-dollar exchange rates.
Determining Rewards Value
Airline Miles Each quarter, we analyze the cost of flights in both miles and dollars for 10 major domestic and international carriers: Delta Air Lines, American Airlines, United Airlines, Southwest Airlines, Alaska Airlines, JetBlue Airways, British Airways, Air Canada, and Lufthansa. For each airline, we look at the carrier’s five most-common routes (three long-distance, two short-distance), and compare the prices in both miles and dollars for economy and business-class tickets. We compile this information on the same day for the same travel dates to determine the estimated average mile-to-dollar conversion rate. Our airline points valuation focuses on domestic economy fares, because that reflects typical American travel habits, based on The Balance’s analysis of government data from the National Travel and Tourism Office. Hotel Points We took a similar approach when valuing hotel points. For each major U.S. hotel group—Marriott, Hyatt, Hilton, Wyndham, and Best Western—we document the prices of premium and low- or mid-tier rooms in both dollars and points. We do this quarterly for hotel rooms in nine cities on the same day, then calculate an estimated average points-to-dollar value.
Using Credit Card Perks
Credit cards can be more than just financing tools and ways to reduce your spending costs. They can also be your ticket to exclusive events, luxury travel experiences, and a slew of extra insurance you hope you’ll never need. We classified such benefits in one of two ways: excellent perks or other features.
For the sake of scoring, we look at the most realistic, high-value use of a reward point. (Realistic meaning you won’t have to fly business class one way to South America to realize that value.) Don’t worry: In our reviews, we tell you what the best use of your points is.
Excellent Perks
Some credit card benefits provide exceptional value, and you can’t get them with most cards, either. Based on our research of hundreds of cards, we deem the following elements “excellent perks” because of their potentially high value and scarcity.
Reimbursement for Global Entry or TSA Precheck feesReimbursement for travel feesAirport lounge accessInsurance coverage for trip cancellation, interruption, or delayInsurance coverage for lost or delayed luggageTravel accident insuranceEmergency medical/dental and evacuation benefitsPrimary rental car collision insuranceElite airline or hotel statusAirline companion passFree checked bagPriority boardingFree annual hotel stayCellphone coverageFree towing and other roadside services
Other Features
The following benefits come with a wide variety of credit cards:
Rental car collision insurance (secondary to your own policy)Insurance for stolen or damaged purchasesRefund when merchant won’t accept returned itemExtended warrantiesTravel and emergency hotlineDiscounts on in-flight purchasesRoadside-assistance hotlineLowest advertised price matchConcierge for booking event tickets, travel, and other servicesSports, music, and event ticket presales, plus VIP access at some eventsExtra benefits when you use your card to help pay for a car Free shipping on certain online purchases
We evaluate excellent perks and other features separately (excellent perks carry a slightly higher weight), but the idea is the same: The more of these a card has, the better the score it receives in this area.
The Ability To Get a Credit Card
Great rewards, minimal fees, and low interest rates are great, but they don’t mean anything if you can’t qualify for them. According to one survey, roughly one-quarter of consumers said they want to get a credit card to build their credit, and about two-thirds said they wished they could know if they’d qualify before applying for a new card. Because of this, our scoring system favors cards that accept lower credit scores, because a lower barrier to entry means the card is a realistic option for more people. We also give a nod to cards that allow people to see if they prequalify before applying and to request credit limit increases within the first year of having the card. That’s because having a high credit limit makes it easier to keep your credit utilization lower—the amount you use of your available credit—and that’s a big deal for your credit score.
The Little Things That Make Your Life Easier
The attributes above account for the vast majority of a card’s score in our overall rankings. While the following offerings won’t move a card from the bottom of the list to the top, they can make the experience of having a credit card just a little bit better. To determine the level of convenience a card offers, we look at the features it offers to people in difficult situations, like trying to rebuild their credit, seeking customer service assistance, or dealing with a lost card or identity theft.
Customer Experience
Things like a mobile application, online chat services, 24/7 customer service, and access to a free credit score are quickly becoming the industry standard—and if a credit card doesn’t offer those tools, we’re not giving it full marks.
Security
No matter what kind of card you have, you’ll almost certainly have to deal with fraudulent charges or the fallout of a data breach at some point. A good credit card gives you tools for dealing with these annoyances. Some features we look for include:
A $0 fraud liability policyText alerts for suspicious activityA virtual card number for extra security when shopping onlineThe ability to lock your card from your online accountAlerts about activity on your credit report or with your Social Security number
The Bottom Line
This is how we approach our overall rankings of credit cards, but we understand you might have different priorities. If you’re looking for a credit card to add value to your travel experiences, you might care much more about rewards than you do interest rates or annual fees. Or, if you’re singularly focused on building your credit, you probably care most about cards that will accept you despite your lack of a credit history. That’s why we created separate methodologies for most of the credit card round-ups you’ll find on The Balance. Even though we adjust the methodology weightings to suit specific categories, they all adhere to our guiding principle: The best cards have low fees, low interest rates, or good rewards—or a combination of the three. Each month, we update our round-ups of the best credit cards to make sure the lists reflect those priorities and, as a result, serve you best.
