Online Credit Cards of February 2023

What is an online credit card?

An online credit card is a traditional credit card that a cardholder can use without having a physical card. Such cards include virtual credit cards that can be obtained in physical form at the request of the borrower. Also, online cards include instant approval credit cards that allow the borrower to have the necessary credit card numbers before receiving a physical credit card. Such cards can also include credit options that are available for receipt only using a desktop or mobile device. Online cards can be used in digital wallets such as Samsung Pay, Google Pay, or Apple Pay.

Pros and cons of online credit cards

Pros

• Detailed customization of the card. Online cards, especially those that can be configured using a mobile device, offer holders both a change in the external design of the card and a change in some of its details. This is useful, for example, for those borrowers who are buying a subscription to a streaming service for the first time for a trial. Usually, such services request card data to charge money for subscription renewal at the end of the trial period. The cardholder can change the credit card number after the purchase of the trial period, and the service will not be able to withdraw money from the card.
• Many online cards have a 0% intro APR period. Many online cards offer holders an introductory period lasting from 12 to 15 months, during which the borrower has 0% APR on purchases and balance transfers. To maintain 0% APR, the borrower simply needs to make minimal deposits to the balance. Often during this period, the size of some fees also decreases. For example, foreign transaction fees in the introduction period can be reduced by a couple of percents.
• Availability of cash back, rewards, perks, and sign-up bonuses. A large number of online credit cards offer the borrower sign-up bonuses, special perks, rewards, and cash back. Usually, holders are offered a certain amount of reward points as a sign-up bonus, provided that they spend a certain amount from the card in the first months after account opening. Perks can include, for example, cell phone protection, discounts on airline tickets, extra luggage, or car rental. Using an online cash-back card, a borrower can have from 1% to 2% on everyday purchases and increased cash-back of up to 6% on certain bonus categories such as travel purchases, grocery store purchases, purchases at gas stations, and others.
• The cardholder can use the card immediately after receiving the approval. All online cards offer instant access to card details. This allows the borrower to use the card immediately after receiving the approval. Usually, a physical card is delivered by mail in 5-7 days. While waiting for delivery, the cardholder can use it for all the usual purchases.

Cons

• There may be difficulties with reservations. Hotel reservations or car rentals may be canceled after the borrower changes the credit card number. Moreover, some hotels and car rentals do not accept such cards because they cannot withdraw money for a reservation if the cardholder changes its details.
• Payments using digital wallets are not available everywhere. Not all offline stores have terminals that accept NFC payment, that is, payment using digital wallets. In such places, online cardholders may have problems. The borrower is advised to check the places where they often make purchases.

Major types of online credit cards

1. Starter credit cards. Starter credit cards are cards that are specially created for people who want to build credit. Such cards are also suitable for helping with rebuilding credit. Lenders do not have credit requirements for borrowers who open such cards. All a potential borrower needs to open an account is a stable source of income. Starter cards send data about the cardholder's payment behavior to three major credit bureaus such as Equifax, TransUnion, and Experian.
2. Co-branded credit cards. Co-branded cards are cards that are issued jointly by two parties. The first party is a bank or other financial institution, and the second party is a brand that offers cardholders bonuses related to this brand. For example, retail stores can offer promotions and discounts on purchases in their stores.
3. Cash-back credit cards. They allow cardholders to earn cash rewards with combined purchases in all categories. Usually, such cards have up to 6% cash back on eligible purchases in special bonus categories and from 1% to 2% cash back on other purchases. Bonus categories can be travel and dining purchases, drugstore purchases, and others. Borrowers can redeem cash back in statement credit on checking or savings accounts.
4. Business credit cards. They are designed for business owners of any size. They help business owners to separate business expenses and personal expenses. Moreover, such cards offer various perks specially created for businesses. Business online banking allows the cardholder to track business expenses and income, optimize the budget and receive financing using a credit line.
5. Secured credit cards. This is a card which credit limit depends on the size of the borrower's security deposit. A borrower who contributes a large amount of security deposit has a higher credit line. Such a card does not require a credit check as it has collateral in the form of a borrower's deposit.

How to get a credit card online?

When choosing a suitable credit card, the borrower needs to pay attention to several important factors.

The most important aspect that is recommended for the borrower to consider is APR. Online credit cards often offer an introductory period during which the cardholder has 0% intro balance transfer APR and 0% APR on purchases. To maintain such an APR during the intro period, the borrower simply needs to make a minimum payment every new billing cycle. Usually, the APR after the end of this period is from 12% to 28%, depending on the borrower's credit history.

It is also important for a potential borrower to study what fees an online card requires. The most profitable online cards do not have an annual fee and have a low balance transfer fee and foreign transaction fee. However, some cards that require annual fee payment offer additional perks to borrowers. Some cards may have a cash advance fee.

To find the most profitable online card, the borrower also needs to consider which perks and rewards are suitable for their needs. For example, travel rewards cards that offer cardholders discounts on airline tickets, additional free luggage, and discounts in hotels are perfect for those who travel often.

Potential borrowers who apply for a cash back card also need to study the terms of how to redeem rewards. The best condition will be to receive a statement credit on a checking or savings account.

For account opening of any type of credit card, the borrower must be at least 18 years old and must be a citizen or permanent resident of the United States. To confirm the identity of a potential borrower, lenders are usually asked to upload a driver's license, passport, or state-issued ID.

Different types of online credit cards have different minimum credit score requirements. Starter cards do not require a credit report and, therefore, can be taken by young people without a credit history. Online cards that have the most offers for rewards, perks, and other bonuses usually require good credit and can rarely accept fair credit. To qualify for the most profitable card, the borrower must have a high credit score of at least 700. Some lenders can accept a 650 credit score.

In addition to the credit score requirements, lenders also have requirements for other aspects of the loan. The borrower should not have a bankruptcy in the last 7 years and should not have more than 30 days of late payments on previous loans.

The future cardholder must have a stable source of income and a debt-to-income ratio below 45%. To confirm the borrower's income, lenders may ask to download pay stubs, tax returns, W-2s, or bank statements.

For account opening, the borrower needs to go to the bank or lender's website and click on the "Get Started" or "Apply Now" button. Next, they need to fill in personal information:

• name
• email
• phone number
• residential address
• zip code.

After that, the borrower needs to choose whether they own real estate or rent a house and how much they pay per month for it. They also need to fill out expenses for other loans if they have any. After that, the potential cardholder needs to enter information about employment status or other sources of income and the amount of annual income. Employed borrowers must also fill in the employer's phone number and the position they occupy. Filling out the application with all the necessary information takes only 5-10 minutes.

The ways to use an online credit card

Online cards are suitable for both online purchases and in-store purchases, as well as traditional credit cards. Online shopping is quite simple if the cardholder connects the online card to the digital wallet. Such cards can be used for large purchases since, unlike personal loans, if the borrower pays the entire amount for the purchase during the period in which the intro purchase APR is 0%, they will pay $0 for interest.

The borrower can also use online credit cards with a low-interest rate to balance transfer an existing loan. Debt consolidation can help lower the APR and the amount of debt. This is especially beneficial during the intro APR period when the intro balance transfer APR is 0%.