Best Credit Cards of 2023

Posted by

Credit Cards: How Do They Work?

A credit card can be used to make in-person or online purchases of products or services. When you apply for and are authorized for a credit card, you will be issued a credit limit depending on your credit score and other variables such as your income.


A potential advantage of using a credit card over cash or a debit card is that it works as a short-term loan. When you use a credit card, you usually have until the end of the credit card billing cycle (also known as a grace period) to pay back what you charged to the card from your bank account. Some cards also allow you to earn incentives such as cash back or travel rewards, as well as extras such as purchase and travel protections. The disadvantage is that if you do not pay the entire amount charged to your card, you will accrue interest, which can be costly over time.

What Is the Process of Credit Card Rewards?

When you use a rewards credit card, you’ll get a percentage of your spending back as cash back, points, or miles, depending on the type of card and the type of rewards it offers. Airline credit cards, for example, often earn miles; cash-back cards get cash back; and general-purpose rewards cards may earn points that can be redeemed for statement credits, travel, retail, or other possibilities.


Some rewards credit cards earn the same flat rate of return on all spending, such as a card that earns 2% back on all purchases. Others feature tiered benefits, which means that some sorts of expenditures, such as gas or groceries, may receive a larger reward rate than others. Consider your purchasing habits and the types of incentives you’ll most benefit from before selecting a rewards card, and then compare it to the numerous other options available to you.

How to Get the Most Out of Your Credit Card Rewards

Credit card rewards can be maximized both while earning and redeeming.

Choose a credit card that offers high earnings on the types of purchases you make the most to maximize the quantity of credit card rewards you get. Cards with grocery, petrol, or travel category bonuses may allow you to earn 3% or more on qualified purchases. If your purchases are dispersed, a 2% cash-back card may be the best option.


When redeeming credit card rewards, you can also maximize its worth. Most essential, you should prioritize incentives that correspond to your objectives, whether they be airline miles, flexible points, cash back, or other types of rewards. Then, evaluate redemption alternatives to discover if any are more valuable than others. The best redemptions often return at least one penny per point.

What Is the Process of Credit Card Interest?

The average daily balance method is used by most credit cards to calculate interest, which means your interest is compounded and accumulated every day based on your daily rate of interest. In other words, your finance charges are calculated daily based on the sum from the previous day.

Credit Card Interest Calculation

The daily rate of interest is calculated by dividing the APR of your card by 365 and then multiplying that value by your balance. To get the average daily amount on a card with a $10,000 balance on the first day of the billing cycle and an APR of 17%, divide 17 by 365, which equals 0.0466%. This indicates that the next day, your card would have a balance of $10,004.66, which is the result of multiplying $10,000 by 1.000466.


Because the average daily balance is accumulated, credit card interest is calculated everyday.

APR against APY versus Interest

It’s critical to grasp the distinction between APR and APY.

APR is an acronym that stands for annual percentage rate and refers to the amount of interest paid on a credit card balance or other line of credit over the course of a year.
The term annual percentage yield (APY) refers to the amount of interest earned on a bank account or other savings vehicle over the course of a year.


In other words, APR is used while paying interest, but APY is utilized when earning interest.

How to Obtain a Credit Card

In general, applying for a credit card consists of multiple steps:

Check your credit score with a credit card issuer or by requesting it from one of the three major credit bureaus.
Once you’ve determined your credit score, pick which form of card is appropriate for you based on what you intend to use it for. Credit cards are often classified as one of three types: incentives, low APR, or credit-building.
While selecting the proper card can be tough, applying for the card of your choice is simple. Credit card applications can be made in the following ways:
Using an online application
Working with an agent over the phone
Sending a paper application
By going to a financial institution and applying in person
How to Get a Credit Card Preapproval



Many issuers will let you see if you’re pre-qualified for any of their cards before you apply. Keep in mind that pre-qualification does not guarantee acceptance and should be regarded as a best guess.

Checking whether you’re pre-qualified is often as simple as entering your name and address on the card issuer’s website and then browsing the available options. This will have no effect on your credit score. These preapproved credit cards make it simple to see if you’re likely to be approved ahead of time.

How Can You Raise Your Credit Score?

You can enhance your credit score in a variety of ways. First, review your credit record to ensure there are no inaccuracies that could have a negative impact. The single most important factor in determining your credit score is paying your obligations on time every time. The amount of debt you have is the second most important component in your credit score, behind payment history. Because credit reporting companies do not have your income information, they calculate credit use rather than a debt-to-income ratio.


The amount of debt you owe in relation to the quantity of credit you have is referred to as credit usage. So, if you have a $3,000 balance on a card with a $10,000 limit, you’re utilizing 30% of your credit. Total credit utilization is calculated by adding together the amounts owed and available on all of your credit lines. It is commonly recommended that usage of 30% or less be the objective.

Credit Cards for People with Good Credit

What is considered a good credit score varies by lender, and you are usually not told what a certain lender’s exact cutoff point between a good and a terrible credit score is. FICO, the most extensively used credit scoring model, does give some useful information that you can use as a reference. The most typical scores range from 300 to 850. A credit score between 670 and 739 on that scale is considered “good.”

Check out Forbes Advisor’s selection of the best cards for good credit in 2023 to discover what might work for your specific situation.


Credit Cards for People with Bad Credit

The meaning of a fair credit score varies per lender, and you’re usually not told what a certain lender’s exact cutoff point between a good and a fair credit score is. FICO, the most extensively used credit scoring model, does give some useful information that you can use as a reference. The most common FICO scores range from 300 to 850. A credit score between 580 to 669 on that scale is considered fair.

Check out Forbes Advisor’s list of the best cards for fair credit in 2023 to discover what might be a good fit for your specific situation.

Credit Cards for People with Bad Credit

While there is no exact figure that distinguishes between “bad” and “good” credit, a FICO Score of less than 580 is regarded very poor.

When it comes to credit cards, the worse your credit score, the fewer options you have. A person with bad credit will often be approved only for a secured card or a card with higher-than-average interest rates and other additional costs. If your credit isn’t perfect, check out Forbes Advisor’s list of the top credit cards for bad credit in 2023 to see what options you have.

What Is the Difference Between the Three Credit Bureaus?

In the United States, there are three major credit bureaus:

Experian Equifax TransUnion

Because each of these agencies uses a somewhat different technique of evaluating your credit activity, it’s not uncommon for you to have a slightly different credit score with each. All three organizations perform the same function: they evaluate your credit activity to generate a three-digit credit score that is used to establish your creditworthiness and, as a result, the interest rates you will be offered on loans such as a credit card or a mortgage.

Leave a Reply

Your email address will not be published. Required fields are marked *