Investopedia Credit Card Rating Methodology

Investopedia is dedicated to providing unbiased, comprehensive reviews and ratings of all credit cards in the U.S. domestic market, comprising over 300 products across scores of banks and card issuers. To provide the best advice for all consumers seeking information about credit cards, we designed a comprehensive ranking methodology to rate each card across over 70 standard features that have been collected and kept updated each month, comprising all the various elements of interest rates, fees, rewards, benefits, customer service and security. 

First and foremost, Investopedia’s credit card reviews are completely impartial and are not subject to financial or editorial influence or approval from credit card issuers. The ratings that we assign are formed from objective scoring data and the product and industry expertise of our credit card editorial staff.

Specifically, we score each feature element on a scale of 0 to 5. Then we provide weight to the most relevant features to calculate final the star ratings that are displayed on Investopedia card review pages. The following feature set categories factor into our overall evaluation of credit cards:

Evaluation of Feature Details

The total level of credit card debt carried by Americans has topped $1 trillion in the past year and shows no signs of abating. We, therefore, feel it is imperative that our readers fully understand the cost and implications of carrying credit card balances in terms of interest and fees in addition to the more popular features such as rewards and benefits. 


The interest charged on credit card accounts is typically variable, meaning that it is tied to an index like the Prime Rate, to which card issuers add a margin (extra percentage) that insures they make a predictable profit for effectively renting you access to their money. Average credit card interest rates being assessed to American consumers ended 2019 at just under 17%. While credit card loans are unsecured (meaning there is no collateral involved to protect the lender) the level of average interest collectively charged by the banks and card issuers in this country is quite high relative to the actual risk of loss (at least according to historic delinquency and charge off rates tracked by the Federal Reserve). 

The average credit card balance is currently just under $6,200 at the end of 2019, according to Experian, which illustrates the financial burden that many Americans bear to make ends meet. Another unpleasant and often misunderstood feature of credit card interest is that it compounds based on your average daily balance so that you incur interest on top of interest (not just your outstanding balance) anytime you fail to pay your balances in full. So, unlike the powerful benefits of compound interest on savings, compound interest on debt can dig a very deep hole unless properly respected and managed. 

While many credit cards advertise 0% promotional interest for 12 months or longer for purchases and sometimes balance transfers, it is the long term APR that we put the significant weight on since that is where the rubber meets the road in terms of cost and is the feature that inflicts the most financial pain on those who carry balances.   

Promotional Rates

While long term rates are important, promotional rates can certainly offer consumers an opportunity to save money by avoiding interest during a certain period of time (such as. 0% APR on balance transfers for 15 months). Critical factors include:

  • Percentage rate offered: 0% is the most common promo rate
  • Promotional period in months: 12 or 15 months is common though longer promo periods exist and earn high marks.


Credit cards come with a myriad of fees that are required to be fully disclosed in online or direct mail promotional material in the card’s “terms and conditions.” A card’s annual fee is typically the most notable fee and the one many people prefer to avoid, if possible. Cards without annual fees can be easier to justify and manage for many since they don’t have to keep track of any rewards value to determine if they are getting sufficient value for their money. The presence of an annual fee and the fee amount relative to other cards in the market determine how we score that important feature. We also calculate the three-year average fee to include cards that waive the annual fee in year one.

Other standard fees that we collect, consider, score, and weight include:

Common fees like those for balance transfers and foreign transaction are assigned scores based on the amount of the fees charged, with the highest scores going to those cards that charge no or very low fees.


Credit card reward programs have been around for decades and continue to evolve. The value of credit card rewards can be challenging to definitively determine as there are so many variables involved on both the earning and redemption side. So, assumptions must be made in terms of average spending, types of spending and the method of redemption for each card to determine the average value of the rewards for each card.  

Rewards Currencies: Cash Back, Miles, and Points

Credit card rewards come in different forms but most allow consumers to earn either cash back, miles or points. Cash back is the most straight forward and is stated as a percentage of each purchase transaction, with a base of 1% being the most common often along with extra cash back for certain spending categories like gasoline or groceries. Other cash back cards offer a flat percentage on all spending, such as 1.5%. In similar fashion, points and miles-based rewards cards allow card holders to earn a set number of points or miles across all spending or extra bonus rewards for certain spending categories that can then be redeemed for travel, gift cards, merchandise or other reward options. Rewards terms such as 2X points or 2 miles per dollar equate to a 2% earnings rate on every dollar spent. When a reward program has several tiers of earnings rates then different spending assumptions must be made to determine the weighted average return.

But regardless of the reward currency involved, the earnings side of the calculation is relatively simple once basic spending assumptions are made. The other side of the valuation equation involves determining the retail value of rewards redemption options and then dividing the number of points or miles required by that dollar amount to arrive at an average rewards value.  

Since credit card rewards values are so variable this analytical process allows a fair comparison of rewards values on a level playing field. 

We begin by evaluating reward cards earnings rates for each dollar of spending. We then assign a score of 0 to 5 based on the level of the cards highest and base earnings rates. We also calculate the total annual earnings rate for each card based on average total and category spending based on BLS (Bureau of Labor Statistics) actual spending information on American families across a dozen income deciles. Higher rewards rates and total rewards earnings earn higher scores. However, when rewards earning is capped in certain bonus categories or those categories rotate each quarter and require activation by the card holder our methodology discounts the score in those instances. Bonus tiers can add value to a rewards program, but the value must be real vs. perceived and our valuation model objectively teases out these differences. Accordingly, more basic rewards programs that don’t require the card holder to keep track of earnings tiers and spending limitations get more weight in our process.

Rewards Redemption

Rewards cards typically have several, and sometimes many, redemption options. We give consideration to the number of options from a flexibility standpoint but primarily score this feature based on the value of the primary options, especially with points and miles cards. These programs typically offer much greater value to travel options compared to those for gift cards or merchandise redemptions, and we identify and score the highest value redemption options when determining rewards value. Below is a listing of potential redemption options across cash back, points and miles rewards credit cards:

  • Statement credit
  • Direct deposit to an investment, savings, or checking account
  • Check mailed to card holder
  • Visa/MasterCard or retail gift cards
  • Merchandise (through issuer rewards portal, Amazon, or Apple Store)
  • Free flights/Vacation packages
  • Free hotel nights
  • Cruise ship booking
  • Points transfer to airline or hotel loyalty programs
  • Donations to charitable organizations

Rewards Valuation

Investopedia determines the value of points or miles for each card’s available redemption options and select the option or options that deliver the highest value. 

As mentioned earlier, the redemption or exchange rate for credit card rewards can vary significantly and many options offer inferior value relative to others. For example, a point may be worth 0.8 cents if you redeem it for merchandise through an online retailer, worth 1 cent when you redeem it for cash back or a Visa gift card or considerably more than 1 cent when redeemed toward an airline ticket.

In terms of our research and valuation we apply scoring logic to the highest value redemption option when multiple options are available of differing value. We accordingly provide in-depth advice about redemption options in our product reviews.

For rewards programs that allow you to redeem points for cash back, gift cards, Amazon purchases, or airline miles, we determined out how much a point was worth in each of those situations. Points and miles should generally yield at least 1 cent of value per dollar to be considered competitive. Cash back cards generally yield at least this value based on their more transparent rewards structure and direct redemption processes but points and miles card values tend to be less apparent (and sometimes quite opaque), which is where our points valuation model provides needed insight for our readers.

Airline Mile Valuation

On a frequent and recurring basis (at least quarterly), Investopedia researches the current cost in dollars and frequent flyer miles of traveling between the most common city pair routes for six major domestic airlines (American, United, Delta, Southwest, Alaska, and JetBlue) and four major international airlines: British Airways, Air Canada, AirFrance/KLM, and Lufthansa). We consider three long-distance and two short-distance routes in this research for same-day travel as well as booking dates from 1 to 5 months into the future.

Domestic economy fares receive the most weighting in our calculations, as that fare class is the most popular among the traveling public according to data from the National Travel and Tourism Office. 

Hotel Point Valuation

For hotel point valuation we look at each major U.S. hotel chain (Hyatt, Hilton, Marriott, Wyndham, IHG, and Best Western) and collect the prices of premium, mid-tier, and low-tier room nights in both dollars and points. We collect this data for nine cities in the U.S. on the same day, then calculate an estimated average point value in dollars of each hotel program. 

In addition to rewards and convenience, most credit cards provide ancillary benefits which can include various types of travel-related and shopping-related insurance coverages as well as other features like free credit scores and global entry/TSA Pre. We organize and score such benefits in one of two ways: as outstanding or standard benefits.

Outstanding Benefits

Certain credit card benefits go above and beyond the ordinary and deliver truly outstanding value that simply isn’t available with lesser cards. Across our database of more than 300 cards we classify the exceptional card benefits below as “Outstanding” in terms of the added value they deliver to card holders:

  • Airport lounge access
  • Primary rental car collision insurance
  • Elite partner airline or hotel status
  • Free annual hotel stay (for hotel cards)
  • Priority boarding
  • Airline companion pass
  • Global Entry or TSA Pre-check fee reimbursement
  • Travel fee reimbursement
  • Free checked bag
  • Trip cancellation, interruption, or delay coverage
  • Delayed or lost luggage coverage
  • Travel accident insurance
  • Emergency medical/dental and evacuation benefits
  • Cell phone theft coverage
  • Roadside assistance

Standard Benefits

The following benefits are generally provided by many non-premium cards:

  • Secondary collision damage waiver coverage
  • Damage/theft coverage on card purchases
  • Refund when merchant won’t accept returned item
  • Extended warranties on purchases
  • Travel and emergency hotline 
  • Discounts on in-flight purchases (with airline cards)
  • Roadside assistance hotline
  • Price match on lowest advertised price

We assign scores to all benefits that are present with a card and apply more weight to those we consider outstanding, which tend to be on premium travel rewards cards.

Security and Customer Experience

Things like issuer mobile apps, U.S.-based 24/7 customer service, ability to lock your card from your mobile device and issuer-provided credit scores have become essential for keeping one’s account secure and monitoring its activity from day to day. Additional features like the ones below also help deal with the risk or reality of credit card fraud or loss of personal information from national data breaches:

  • A $0 fraud liability policy
  • Text and/or email alerts for card usage or suspicious activity
  • Chip and PIN
  • Alerts about activity on your credit report or with your Social Security number
  • ID theft protection

All security and customer service features are individually scored when present and receive a significant cumulative weighting in our star-based rating system.

While most everyone aspires to a credit card that offers lucrative rewards and first class benefits the reality is that not everyone can qualify given their credit situation, as those types of premium features generally require excellent credit. With that in mind, our scoring model gives rating points to those cards that allow a broader cross section of applicants to qualify. We also give high marks to those cards that allow for a prequalification process that does not affect a person’s credit, as those with marginal credit can otherwise see their impaired scores fall even further when simply trying to gain access to new credit. We believe tools like this along with ones that allow consumers to see their credit scores each month can be a great way for those with little or no credit history (or bad credit) to build their credit over time and enjoy the benefits that strong credit scores can entail.

How We Select our Best Cards 

We group and score credit cards across a number of categories that reflect their primary attributes and features, though some cards can live in more than one category. We have distinct weightings for our scoring methodology across the following categories:

  • Travel Rewards Credit Cards: Cards with general travel rewards that can be redeemed for travel on any airline or hotel
  • Cash Back Credit Cards: Cards that allow card holders to earn a percentage of every transaction back in the form of a cash back equivalent—a statement credit, check, or gift card
  • Points Credit Cards: Cards that earn points per dollar in spending and offer multiple redemption options through the card issuer
  • Airline Credit Cards: Cards offered in partnership with airlines that earn miles for free travel
  • Hotel Credit Cards: Cards offered in partnership with major hotel chains that earn points for free hotel stays
  • Student Credit Cards: Cards that are designed for the limited credit history of college students, many of which offer rewards
  • Secured Credit Cards: Cards that require a security deposit to offset the risk to issuers, allowing those with bad credit to build credit scores
  • Business Credit Cards: Cards designed for the needs of small business owners 

We collect data on all cards in our database through official issuer online account terms and conditions documents that we scan with software on a daily basis to ensure all rates, fees, and rewards terms are accurate in our credit card reviews.

As we state throughout our credit card reviews, each consumer is unique and has different credit card needs based on personal situations, aspirations, and other factors. We make every effort in our review process to address those needs by describing precisely who cards are best suited to, depending upon various circumstances. We believe credit cards should be leveraged by consumers to provide convenience, security, and valuable rewards for those with qualifying credit, and that carrying balances and incurring excessive interest charges should be avoided by all card holders, regardless of credit quality. While our rating methodology won’t be able to address every potential situation or score cards to an exact individual’s spending, credit needs or rewards aspirations, we believe that we have created the most useful methodology to review, rank, and display the very best credit cards by category and overall to help provide objective guidance to our readers.