Your Credit Card: Should You Focus on Low APR or Cash Back?

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Low APR versus cash back: Which feature matters most when applying for a new credit card

In a GOBankingRates survey, 1,003 Americans shared answers to the question about credit card features that matter most to them. According to our data, 26% of respondents value a low purchase APR. Rewards and/or cash back were the top priority for 22% of respondents.

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Which of these features should cardholders prioritize? Sometimes the answer depends on how you plan to use your credit card.

Avanti Shetye, CFA and founder of Foolproof Financial Freedom, recommends cardholders ask themselves the following questions to figure out whether they need a low APR or cash back emphasis on their credit cards.

Do You Plan To Carry a Balance?

Cardholders who expect to carry large balances are recommended by Shetye to focus on credit cards that have low APRs. Those who already have high balances may consider credit cards with 0% balance transfer fees. 

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Make sure you have a debt payoff plan in place for a balance transfer. As a pro tip, try to avoid carrying a credit card balance when possible. Make your payments on time each month and pay the balance in full as often as possible. 

Will You Make a Big Purchase Using Your New Credit Card?

Let’s say you’re planning to purchase something big using your new credit card, like furniture or a major appliance. Shetye recommends applying for a credit card with a 0% introductory APR. Doing so will help you spread the cost of this large purchase out over the introductory period.

Do You Want To Earn Cash Back, Points or Airline Miles?

If you plan to pay off your balance in full, Shetye recommends focusing on rewards like cash back, points or miles. 

Cards with cash back are great ways to earn extra cash while using the cards for regular purchases. If you like to travel, Shetye said, you may want to focus on cards that offer rewards in miles. Keep in mind, however, better rewards often come with higher annual fees.

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Is There an Annual Fee?

Shetye does recommend applying for credit cards with no annual fees. Incidentally, 38% of respondents in our GOBankingRates survey cited no annual fees as the most important factor when selecting credit cards — surpassing both low APRs and cash back.

“You don’t want to pay an annual fee in addition to an interest on your balance,” Shetye said. 

What if you decide to apply for a credit card with an annual fee? Consider running a cost-benefit analysis on the annual fee versus rewards.

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About the Author

Heather Taylor is a senior finance writer for GOBankingRates. She is also the head writer and brand mascot enthusiast for PopIcon, Advertising Week’s blog dedicated to brand mascots. She has been published on HelloGiggles, Business Insider, The Story Exchange, Brit + Co, Thrive Global, and more media outlets. 

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