LendingTree’s Credit Card Methodology: How We Help You Find the Best Credit Cards
In case you’re wondering if we get paid to recommend certain cards over others, or if our best credit card picks are based on our writers’ personal whims, you can rest assured: We use a methodical approach to choosing the best credit cards. Our goal is to provide ratings and rankings that are objective and most useful to our readers.
We also aim to be transparent in how we make our choices, to educate our readers and help them make the best financial decisions possible. Read on to learn more about our rating system and how to use it to pick the best credit card for you.
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How we use calculations to pick the top credit cards
While there are many factors that go into a credit card, we think that a card’s value (either the value that it provides in rewards and perks, or the amount it saves you on credit card interest) is the most important factor for picking a great card, and it’s the secret sauce behind our ratings.
It can be difficult to determine:
- A) For a 0% APR card: How much you’ll save in interest with one card versus another.
- B) For a rewards card: Which card is likely to earn you more rewards.
It can be especially perplexing if you’re comparing points and miles programs, where values can vary wildly. To help you navigate the numbers, we’ve done the math for you.
Rewards cards
For rewards cards, we look at the average value of the card over two years, taking into account sign-up bonuses, annual bonuses, ongoing earning rate and the annual fee:
- First we gather value estimates for different points and miles programs (with a fixed value of 1 cent for cash back cards).
- Then, using U.S. Bureau of Labor data, we estimate how much a model cardholder might earn with a particular card, considering the card’s earning categories and the value of the card’s points or miles.
- We also add in the value of sign-up bonuses and annual bonuses, and — if the card is a travel card — the value of perks like lounge access and travel statement credits.
- We subtract the annual fee from the total, and look at the average over two years to pick cards that are likely to offer you long-term as well as short-term value.
How do you calculate first and second year value?
We use the following spending estimates, based on U.S. Bureau of Labor statistics, to estimate how much an average cardholder might earn in a card’s spending categories. We multiply the estimated spend by a card’s spending category multipliers and point value (1 cent for cash back cards), add in the sign-up bonus and subtract the annual fee (if there is one).
| Estimated annual spend by category | |
|---|---|
| Groceries | $5,260 |
| Dining | $3,030 |
| Apparel and services | $1,754 |
| Gas | $2,148 |
| Public transportation | $452 |
| Entertainment | $3,568 |
| Travel | $1,476 |
| Airfare | $338 |
| Hotels | $378 |
| Other spending | $1,596 |
Here’s a sample calculation for a cash back card:
-
- Sign-up bonus: $250
- Earning rate: 3% cash back on dining and groceries, 2% cash back on gas, 1% cash back on other purchases
- Annual fee: $95
| First year value | |
|---|---|
| Sign-up bonus | $250 |
| Rewards earned on $3,030 in dining | $90.90 |
| Rewards earned on $5,260 in groceries | $157.80 |
| Rewards earned on $2,148 in gas | $42.96 |
| Rewards earned on $1,596 in other spending | $15.96 |
| Total earned, minus $95 annual fee | $462.62 |
| Ongoing value | |
|---|---|
| Rewards earned on $3,030 in dining | $90.90 |
| Rewards earned on $5,260 in groceries | $157.80 |
| Rewards earned on $2,148 in gas | $42.96 |
| Rewards earned on $1,596 in other spending | $15.96 |
| Total earned, minus $95 annual fee | $212.62 |
0% APR and balance transfer cards
For cards with 0% introductory offers, we try to give you an idea of how much the average cardholder can save on interest.
For balance transfer credit cards
- We look at the amount of interest saved on a $6,000 transfer with a $300 monthly payment.
- We factor in the balance transfer fee, annual fee (if the card has one) and any remaining interest you’ll have to pay once the introductory period expires, using an average of the card’s low and high APR.
For 0% APR credit cards
- We look at interest saved on a $1,800 purchase with a $300 monthly payment.
- We add any rewards earned (including sign-up bonus) into your savings — since these can help you pay down your balance — minus the card’s annual fee (if it has one) and any interest you’ll have to pay once the introductory period expires.
Other credit card criteria we consider
Obviously, value isn’t everything. For one thing, you need to be able to easily use your card and its rewards. Plus, many cards come with other valuable perks that shouldn’t be overlooked, like travel and purchase protections. Here are are other items we consider in our ratings:
- Ease of redemption (for cash back, rewards and travel cards). We give extra points for cards that don’t provide barriers to redemption, like blackout dates, expiration dates and minimum redemption thresholds. We also award points for cards that provide flexible redemption options, like cash back and travel statement credits.
- No foreign transaction fees. For travel credit cards, we award points to cards that don’t charge fees for making purchases outside the U.S.
- Features for building credit. For credit building cards, we devote a significant portion of the score to features for building credit, including whether the card reports to all three credit bureaus and offers account reviews to upgrade your card.
- Other features. We compare the card’s full set of features against tiers of features and assign it a score based on where it falls.
How to use our methodology to pick the right card for you
As with any ratings system, you should take this all with a grain of salt. We aim to offer the best values for the average cardholder, but you may be very different from the average cardholder. We’ve laid out all the factors that go into our card ratings, so that you can take the next step: Figuring out which features matter the most to you, and perhaps even taking a stab at your own value estimates.
How do you decide how much points and miles are worth?
You’ll find general estimates for points and miles across the web, but it’s a good idea to know how you’re likely to redeem your points miles and how much value you’re likely to get.
Some credit card programs, like Chase Ultimate Rewards® and American Express Membership Rewards, make it easy by offering a fixed value for most of their redemption options. For instance, depending on which cards you own, you’ll get $0.01-$0.015 per point that you redeem for travel through the Ultimate Rewards program.
Value of Chase Ultimate Rewards® points
- Ultimate Rewards portal travel: $0.01-$0.015
- Cash back: $0.01
- Gift cards: $0.01
- Pay with Points on Amazon: $0.01
Value of American Express Membership Rewards points
- Membership Rewards portal travel: $0.075-$0.01
- Pay with Points on Amazon: $0.07-$0.01
- Redeem points for gift cards: $0.05-$0.011
- Redeem points for statement credits: $0.06
- Buy merchandise with points: $0.05
- Donate points to charity: $0.07
However, things get trickier with hotel points and airline miles programs, where the value of your rewards can vary with each redemption. Our suggestion is to estimate the value of your target redemption option.
For example, take a look at hotel rates and the number of points required for Marriott hotels in Oahu before you start collecting Marriott points for your Hawaiian getaway. (This will also tip you off if the program has award space to accommodate your travel plans, and if it charges an achievable amount of points or miles.)
With programs that allow you to transfer points to hotel and airline programs — like Ultimate Rewards and Membership Rewards — you can use this approach to check awards across a variety of travel programs. If you have the time and patience to navigate different rewards programs, you can find really great deals this way (think: values up to 4 cents per point).
You can use the following formula:
Point value =
How to make your own calculations
To help you in the process, we offer a couple of sample calculations below. By plugging in your own budget and travel preferences, you can get a good idea of whether a card is worth it for you:
Cash back credit card calculation
In this scenario, we compare a card that earns 6% cash back on groceries to a card that earns 2% cash back on everything. For our model cardholder, the grocery card beats the cash back card, even though it charges a $95 annual fee.
| Feature | **Winner** Card A* | Card B* |
|---|---|---|
| Earning rate |
|
|
| Sign-up bonus | $300 | $200 |
| Rewards earned on $6,000 in groceries | $360 | $120 |
| Rewards earned on $3,000 in gas | $90 | $60 |
| Rewards earned on $11,000 in other spend | $110 | $220 |
| Annual fee | $95 | $0 |
| Rewards minus annual fee | $765 | $600 |
* These are fictitious examples for education purposes only.
Travel card calculation
In this scenario, we compare an airline card with free lounge access and free checked luggage to a general travel card that earns 2X miles on every purchase. Though the airline card charges a high $650 annual fee, its airline perks make it a better value for a frequent flyer.
| Feature | **Winner** Card A (miles worth $0.013 each)* | Card B (miles worth $0.01 each)* |
|---|---|---|
| Earning rate |
|
|
| Sign-up bonus | 80,000 miles worth $1,040 | 75,000 miles worth $750 |
| Rewards earned on $400 in airfare | 1,600 miles worth $21 | 800 miles worth $8 |
| Rewards earned on $1,800 in travel | 3,600 miles worth $47 | 3,600 miles worth $36 |
| Rewards earned on $3,000 in dining | 6,000 miles worth $78 | 6,000 miles worth $60 |
| Rewards earned on $14,800 in other spend | 14,800 miles worth $192 | 29,600 miles worth $296 |
| Annual fee | $650 | $95 |
| Rewards minus annual fee | $728 | $1,055 |
| Free checked luggage ($35 in savings per flight, eight flights per year) | $280 | N/A |
| Airport lounge membership | $650 | N/A |
| Global Entry/TSA PreCheck credit | $100 | $100 |
| Overall value in the first year | $1,758 | $1,155 |
* These are fictitious examples for education purposes only.
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