The Best Budget DAC – Unbiased 2023 Review

We asked our experts – what's the best budget DAC to buy right now? What's the best USB, audiophile, and portable DAC you should get? We dissected this confusing audiophile segment and discovered that the best digital-to-analog converters have a few things in common. Read on to find our pick of the best budget DAC on the market, and read our detailed buying guide – from the perspective of sound engineers and musicians.

There’s a revolution a-brewin’ among rookie audiophiles, and this revolution is being led by a new wave of budget DACs.

Far from the cumbersome, clunky crap that used to flood the market years ago, the best budget DAC today is a tiny, affordable beast that can add serious punch, panache, and clarity to your listening experience.

As a relatively new product category, however, digital to analog converters (DACs) need some explanation before you can buy them. How DACs work, what factors affect their performance, and what to look for when buying them – these are all important considerations, especially for budget buyers who can’t splurge on a $2,500 Benchmark DAC.

So in this article, I’ll do exactly that. I will:

• Share a list of my 5 best budget DACs you can buy right now
• Share a detailed guide to buying the best budget DACs

For quick navigation, use the table of contents below to jump to the section of your choice. Otherwise, read on.

Results and Review Process

While there are a number of elements that go into making a competent DAC, we essentially think it all boils down to two elements: value for money (i.e. price) and performance.

Price is the limiting factor in most purchase decisions. If you had an infinite budget to work with, you could buy any bespoke gear (and audiophile gear can be extraordinarily expensive). But since we don't live in that perfect world, your choice – and ours – depends heavily on price.

Performance, of course, is a top criteria. Affordable gear that doesn't sound good isn't worth any amount of money.

Based on these two factors, here are our the six best budget DACs right now:

Mapping this list on a price-performance graph, we get the following:

In the next few sections, I'll do a deep dive on each of these DACs and cover what makes them worth your money.

The Best Budget DACs

I’ll start this guide by answering the question you all came here for: what’s the best budget DAC I can buy right now?

At a glance, these are my top selections:

Let's take a more detailed look at all these DACs below:

Best Budget DAC: AudioQuest DragonFly Red

After using dozens of the best USB DACs, I have zero qualms making this claim:

The AudioQuest DragonFly Red is the best budget DAC on the market.

Audiophiles swear by the DragonFly Red. It's absolutely tiny, doesn't cost the earth, and packs a massive punch.

It's for no reason that What Hi-Fi calls it “near-flawless”.

The DragonFly Red (not to be confused with the cheaper DragonFly Black – which is also good but not as much) is a portable USB DAC. This means that it plugs straight into a USB port and outputs the digital audio via a headphone jack. There's a small built-in headphone amp as well.

As far as bells and whistles go, it has none. You don't get half a dozen ports, nor do you get dedicated volume controls.

What you get, however, is absolutely fantastic digital audio quality. It will seriously blow away your expectations, especially if you've never used a DAC before.

Let's look at some of the details:

• Build quality and design: The DragonFly Red is as small as DACs come. It weighs under 100g and is just 2.4″ long. Plug it in and you won't be able to distinguish it from a standard thumb drive. It features a shiny red metal casing with a glowing green dragonfly. I must say I'm not a fan of the dragonfly logo. Overall, a tiny, highly portable package.
• Sound quality: The sound quality is where the DragonFly Red truly shines. The onboard audio conversion chip adds much needed warmth and balance to overly bright headphones. The highs become more mellow and the mids aren't as murky. The soundstage becomes wider and details become richer.
• Sound quality (cont.): The results are most noticeable with easy and medium to drive headphones. You get astonishing clarity and a much richer, vibrant sound. With hard to drive headphones (especially cheaper cans), the results are good but not as noticeable.

There are a few caveats before you buy this. For one, there are compatibility issues with some Android phones. If you're going to use it exclusively with Android, check user forums before you buy.

Note: This article was originally written in 2019 and upon subsequent revisions, we found that AudioQuest has solved the compatibility issues with Android devices. Support for older Android devices, however, might be poor.

Two, while the headphone amp is powerful enough, you won't get the best results with high impedance headphones, like the Sennheiser HD600 (300 Ohms). The sound quality with low to mid impedance headphones, however, is downright stunning. I also found the audio jack on my unit to be a bit loose but others haven't reported similar problems.

Overall, there are few DACs on the market that offer the combination of sound quality, portability, and value for money. It easily outperforms DACs that cost 3x as much. And it packs all of this into a package you can carry around anywhere.

Truly the best budget DAC on the market.

Most Affordable DAC: FiiO K1

It's no exaggeration to say that FiiO revolutionized the audiophile industry when it released its first line of DACs and audio players more than a decade ago.

What used to be an elite hobby that required hundreds of dollars to enter was now suddenly cheap enough for the average consumer.

Among FiiO's huge lineup of DACs, the FiiO K1 is certainly one of the cheapest. But that doesn't mean it isn't capable. In fact, for people on a tiny budget, this is probably the best introduction to the world of DACs.

Here are a few things you should know about it:

• Build quality: Like most FiiO devices, the K1 is surprisingly well-built for the price. The brushed metal finish looks good and the entire package is designed to take a beating. The only thing I'm not a fan of is the tiny plastic clip at the front – which you're going to break off in the first week of use.
• Design and dimensions: The K1 is a portable DAC. But unlike its competitors (such as the AudioQuest Dragonfly), the K1 doesn't include a USB connector. Instead, you have to use a separate USB cable. This keeps the device size smaller, though it also means you have to carry around another cable.
• File support: For an entry-level DAC, the K1 supports a huge range of file types. You can play most formats – WAV, Flac, Ogg, etc. The only format it doesn't support is DSD. But if you're dealing in DSDs, you deserve a higher end DAC anyway.
• Great sound quality: The K1 supports headphones rated between 16 to 100 Ohms. It can also sample at up to 96 kHz. The upper frequencies are sharper and the low-end is more defined. It removes some of the murkiness from the mids as well. The end result is a noticeable improvement in sound quality, especially when compared to the onboard sound in most phones. It's not as good as a full-fledged desktop DAC chip, but it's much better than anything you can get at this price range. Audio output is via a headphone jack only, though you can also plug in studio monitors via an aux cable.

One source of complaint is the build quality of the headphone output. The headphone output port sits a little loosely inside the unit. Repeated plugging in and out of the port can damage it.

On the whole, the FiiO K1 is a very capable entry-level DAC. It has its flaws, but for its price, you couldn't ask for more. If you're looking for something truly affordable, this is the best budget DAC you can buy right now.

Best Mobile Amplifier: FiiO A3

Unsurprisingly, there is yet another FiiO on this list. Except this one isn't a DAC – it's just an amplifier.

Keep this in mind – even though this article is about DACs, the A3 is only an amplifier. That is, it will amplify the signal from the source (such as your phone) but won't clean it up. While this might be less than ideal for some, a portable amplifier remains a great way to get more powerful sound from your phone at an affordable price tag.

The FiiO A3 features a 1400mAh rechargeable battery that charges via USB. Fully charged, FiiO says it gives you 16 hours of juice. In more practical tests, you can eke out around 14 hours of playtime from it. There is a headphone output keeping in line with the phone-friendly nature of the device.

Power supply through the rechargeable battery means that unlike the K1, it won't drain your phone's power when plugged in. This makes true portability possible and ranks as my best budget DAC for phone users.

Beyond the battery power supply, let's look at some other features:

• Build quality: The all-aluminum housing for the A3 looks handsome. Because of the battery, there is some heft to it as well (it weighs about 90g). The volume dial is chunky and feels high quality. Rotating it gives you a nice clickiness. Overall, it can take some punishment.
• Design and dimensions: The A3 measures ~ 3.6″ long and 2.2″ wide. That's nearly the same width as a standard phone (iPhone 7 is 2.6″ wide), but about 2″ shorter. You can wrap this around the back of your phone for easy carrying.
• Great sound quality: The FiiO A3 has a very neutral DAC chip. It adds clarity to the sound signal without adding any of its own color to it (which is what a DAC should do in the first place). The highs are distinctly sharper and there is less muddiness in the mids when the bass boost is turned off. Audio output is via a headphone jack, though you can also plug in a pair of speakers or studio monitors via an aux cable.
• Bass boost: A standout feature is a bass boost toggle switch. Switch it on and it adds roughly 4dB “boost” to the mid-bass range at 50Hz. This somehow makes the entire sound stage more intimate while also improving bass frequencies. On the downside, bass headphones with the bass boost turned on have a noticeable hum.
• Volume dial: One of my favorite features of the A3 is the analog dial on the device's front. It's a simple feature but it gives so much more intuitive control over the volume than fiddling with your phone.
• Accessories: The FiiO A3 comes with two rubber stacking bands to keep it against your phone. It also comes with 6 stick-on feet to avoid damaging the back of your phone. Other accessories include a 3.5 to 3.5mm cable and a USB charging cable.

Overall, this is one of the best USB portable amplifiers you can buy in this price range, regardless of whether you use the battery power supply or not. The sound quality is noticeably better and the bass boost function makes the sound significantly more intimate.

I would recommend it over the FiiO K1 if you can stretch your budget a few dollars and if portability isn't important to you.

Best Budget DAC for PCs: Korg DS-DAC100M

Most of you are familiar with the popular digital audio file formats – MP3, WAV, and FLAC.

But there's another, far better audio format you might not know about – DSD.

DSD (Direct Stream Digital) was an audio format developed by Sony for their Super Audio CD (SACD). DSD is one of the highest quality audio formats out there. The DSD sample rate is 2.8224 MHz, which is 64 times the sample rate of conventional CD audio (@ 44.1 kHz).

Now most DACs use the PCM method for digital-to-analog conversion. While this method works well enough, it isn't nearly as accurate as DSD.

The problem is that you need a dedicated player to play DSD files. And you need a dedicated DAC for it as well.

Which is where the Korg DSDAC100M comes into the picture.

Designed as a more portable and affordable “mobile” version of the first generation DSDAC100, this Korg unit has a DAC chip built from the ground up to support DSD files.

It's a rare offering from Korg – a mainstay in musical instruments.

Here's what you should know about it:

• Build quality and design: The DAC100M is the same size as a standard external hard drive. It also has the same build quality with a hard plastic casing. It's nothing to write home about but it won't be an eyesore on your desktop either.
• DSD playback: The DAC100M works two ways – it can play native DSD files via the AudioGate3 software. And it can upscale WAV or even MP3 files via real-time DSD conversion. The latter uses the computer's hardware to perform the conversion.
• Sound quality: Playing back native DSD files via the Korg DAC100M is a revelation. You'll hear details you didn't even know existed earlier. Real-time conversion (or rather, upscaling) of MP3/WAV files isn't as good, but it sounds far better than plain audio. You'll need a good library of DSD audio files to take full-advantage of this DAC.
• AudioEngine 3: All playback and conversion happens through Korg's proprietary AudioEngine 3 software. This is big limitation if you're used to using iTunes or VLC. Essentially, your audio output is severely constrained by this software. If you're used to using another audio player, you will have to port your library over.

On the whole, the Korg DSDAC100M isn't the best budget DAC around, nor is it for everyone. If you don't have a high quality DSD audio library, it won't really help you much. Sure, the upscaling of MP3/WAV files improves sound quality. But if that's how most of your library is organized, you're better off getting a conventional PCM digital to analog converter.

I recommend this for anyone looking to playback and improve the sound quality of his DSD files. For anyone else, pick one of the other options on this list.

Best Portable DAC: NextDrive Spectra

How small can a DAC get?

If you thought the FiiO K1 is the smallest DAC possible, think again.

The NextDrive Spectra blows expectations out of the park. And it offers astonishingly good audio quality to go with it.

But let's back up a second.

The NextDrive Spectra is one of the best USB DACs that's designed for smartphones and people on the go. It's delightfully small – the main unit is 3/4th the size of a cigarette. Even with the USB cable attachment, it is so light and tiny that you can fit it inside your wallet. Of course, that means you get just one digital input, but that's a compromise I'm comfortable making.

Here's what you should know about it:

• Build quality and design: The main unit is less than 3″ long. Combined with the cable, it comes in at about 9″ in length. The DAC unit is cylindrical and housed in a brushed metal casing, which feels robust and looks like it can take a beating. The cylindrical shape also means that carrying it around is easy – ther are no edges or clips to catch on clothes or bags.
• Sound quality: The NextDrive Spectra uses the ESS Sabre 9018Q2C DAC. You can get up to 13.3 mW at 300 Ohm, enough to drive even the hardest of DAC headphones like the Sennheiser HD580s. It supports both PCM at up to 384kHz and DSD at 11.2 MHz.
• Sound quality (cont.): The bass is fast and precise, especially with mid-fi headphones. The mids sound very “forward” and without any color. The neutral sound is great for catching fine instrumentation. The only downside is the slightly dry treble. Overall sound quality is strong, especially for a package so tiny.
• Battery use: One major caveat is the amount of phone power it uses when plugged in (~ 11% per hour of use). Make sure to keep your power bank handy if you're taking it with you on the road.

The NextDrive Spectra is an exceptional mini DAC. While there are better sounding DACs on the market, nothing can match up to its size and portability. It's perfect for smartphone users and anyone who wants superior digital audio without having to carry around a bulky DAC.

Best Budget DAC for Audiophiles: Audioengine D1

At the Audioengine D1 range, things start getting interesting.

As good as the entry level FiiOs might be, they're still toys that boost the sound quality.

For a “real” transformation of your listening experience, you need to get a “premium” entry-level desktop DAC like the Audioengine D1.

The D1 is a desktop USB DAC, which means that it needs to be plugged into a computer to fully utilize. You can technically pair it with a phone as well (via the USB), but given the lack of portability, it's not the ideal way to use it.

On that note, let's look at some of the salient features of the Audioengine D1:

• Build quality: As a desktop DAC, you don't expect the D1 to be subject to much rough and tumble. Nevertheless, the D1's hard plastic body should be able to take some punishment. There are two huge screws holding everything in place and the entire package feels robust. The volume control knob has a smooth finish.
• Design and dimensions: The D1 won't win any design contests. It's mostly an inoffensive plastic box that sits on your desktop. Its dimensions are slightly smaller than two cigarette boxes laid side-to-side.
• Sound quality: Out of the box, the D1 will add significant richness to your onboard computer sound. There is substantial warmth to the mids and the bass is more emphasized. On most DAC headphones, you will notice that the treble is more laid back and doesn't jump out as much. On the downside, instrument separation isn't as good and the sound stage feels smaller.
• Input/Output: One good thing about a desktop DAC like the D1 is the plentiful digital input/output options. You can get input via USB (which also powers the D1) and via optical cable. For output port, you have support for both headphones or RCA analog. The latter is great for hooking it up to a TV or dedicated amp (in which case, the D1 acts as a preamp).
• As a headphone amp: The D1 works best as a headphone amp if it is paired with high impedance (i.e. ohms) headphones such as the Sennheiser HD580. The DAC chip doesn't work quite well on low impedance headphones and can produce an unbalanced, jumpy sound.

On the whole, the D1 is a good start if you need an introduction to “serious” DACs. It is a marked improvement on your computer's onboard sound. Once you've had a taste of the D1, you can

So that takes care of my roundup of the best budget DACs on the market. In the next section, I’ll share a quick buying guide to help you make better decisions.

A Buying Guide to Buying the Best Budget DAC

So…DACs.

How does one go about buying them? What things go into making the best budget DAC?

Or rather, let’s back up a minute: what exactly is a DAC? What does it to for your music? And most importantly, do you even need one?

I’ll answer all these questions and more in this section.

But first, let's look at our review process.

How I reviewed DACs for this article

For this review, I looked specifically at budget DACs.

Now budget, for DACs, can be a contentious term. DACs audiophiles swear by – the Chord Electronics and STAXs of the world – will set you back by thousands of dollars. These high resolution units have fantastic internals, but are also prohibitively expensive.

At the other end of the spectrum, you have cheap $50 Chinese import DACs which are nothing more than glorified sound cards.

So for the purpose of this article, I defined “budget” between $50-$200. You get a decent range of DACs within this bracket. At the low-end, you get nice portable DACs that will clean up the signal nicely. At the high-end of this range, you get competent offerings that will give a $5,000 STAX a run for its money.

Besides the price, I also looked at the following when choosing the best budget DAC:

• Sound quality: The number one selection criteria for any audiophile equipment remains sound quality – obviously.
• Build quality: Can it take some punishment? Does it look good? Will it fall apart after a year of rigorous use? I looked at build quality and design as fundamental factors in my review.
• Value for money: More than raw performance, I looked at the value for money of each DAC. We’re on a budget after all.

My review system used five headphones:

• Apple EarPods, to test the performance on cheap “everyday” headphones
• Sennheiser HD280, to test the performance on low-end studio headphones
• Beyerdynamic DT990 Pro, to test performance on a popular “standard” audiophile headphones
• Bose QuietComfort 25, to test on a popular noise cancellation headphones
• Sennheiser HD600, to test on high impedance headphones

I also used the following records to test each DAC:

• Electric Ladyland by Jimi Hendrix (FLAC format)
• Dark Side of the Moon by Pink Floyd (WAV format)
• Kid A by Radiohead (FLAC)
• Awaken, My Love by Childish Gambino (FLAC)
• Random Access Memories by Daft Punk (FLAC)
• Speakerboxxx/The Love Below by Outkast (WAV)
• Kind of Blue by Miles Davis (MP3 @320kbps)
• After the Gold Rush by Neil Young (MP3 @128kbps)
• Wish You Were Here by Pink Floyd (MP3 @320kbps)

This covered a range of genres. I intentionally chose lossless formats (FLAC), uncompressed audio (WAV), and compressed audio (MP3). This helped me get a good sense of the performance across a wide spectrum.

My testing systems were a 2017 MacBook Pro and a Lenovo Ideapad 510 laptop with i7 and 24GB of RAM.

With that out of the way, let’s look at our buying guide for choosing the right DAC for your needs.

What is a DAC?

To understand what a DAC (digital to analog converter) does, you have to first understand how the human ears work.

The human hearing apparatus consists of three components:

• An eardrum membrane inside the ear canal
• Three tiny ear bones, called the malleus, stapes, and incus
• A cochlea filled with liquid that transmits signals to the brain

You “hear” when sound waves striking the eardrum membrane set it in motion. These vibrations are transferred to the ear bones, which then carry them all the way to the cochlea. Inside the cochlea, the vibrations set the inner liquid into motion, which sends a signal to the brain, allowing you to hear.

It’s a complex series of interactions, and it’s remarkable that our ears are able to hear things 24×7 and catch even the tiniest of noises.

(By the way, speakers make sound with the same principle – a thin membrane vibrates based on the sound signal, producing sound.)

Now the sound waves that cause your eardrum membrane to vibrate are all analog. That is, they have a wave-like pattern, like this:

The height of the crest/trough and the spacing between each crest/trough decides the frequency and volume of each sound. A high pitched sound has less spacing between each wave. If the height of the wave is higher, it means the sound is louder as well.

For instance, here are two kick drum sounds. Which one do you think would be louder?

From the wave alone, you can confidently say that Kick Drum A would be louder and fuller.

Your ears are able to process all this information only when the sound is in the form of a wave, i.e. it is a natural, analog sound.

Now there’s a problem.

All the music you listen today is digital. It is stored in computers and the internet not as analog wave files (not to be confused with the .wav file extension), but as a digital file.

And as you know, a digital file is nothing but a series of 1s and 0s, i.e. binary code.

The drum kick you heard earlier? It would look like this in binary:

Your brain can’t hear binary code. Heck, you can’t even make out what an arrangement of 1s and 0s might sound like. You might be able to tell the difference between two kick drums based on their waveform, but you can’t do the same for two digital files.

So before you can hear a digital file, you need to convert the series of 1s and 0s into something that can be heard by human ears, i.e. an analog file.

And how do you do this?

You guessed it: by using a DAC, i.e. a digital to analog converter.

As the name suggests, a DAC is nothing but a chip that converts computer-readable binary code into human-hearable analog signals. It reads the series of 1s and 0s, and translates them into a format that people can hear, i.e. sound waves.

Every single digital device that you own, and that is capable of playing digital audio has a DAC. Your iPod had one, your phone has one, and your computer has one in its chipset. All this converter does is take the binary code and translate that into a series of analog waves or sounds.

But wait…I already have a DAC?

Yup, that’s right. Every computing device capable of playing audio already has a DAC built into it. Otherwise you wouldn’t be able to play any audio at all.

The DAC might be built into the chipset, or it might be in your computer’s sound card. In either case, this little converter is what makes digital audio possible.

Which might make you wonder why you even need to shell out money for the best budget DAC…

So Why Do I Need an External DAC?

To answer this question, you first have to understand how computers translate binary code into audio, and vice-versa.

In traditional analog mediums, like vinyl or these bad boys…

…sound is recorded literally as an analog signal. A turntable stylus tracing the grooves in a vinyl record is literally playing back the original sound as recorded.

But digital sound doesn't work the same way.

Instead of analog signals, digital music files are usually in the form of a “Pulse Code Modulation” (PCM).

PCM is a method to digitally represent analog signals. This is done by tracing an analog signal and dividing it into small sections, like this:

At each section, the amplitude of the waveform is measured and represented as a binary number (i.e. a string of 1s and 0s).

Now this is where two important concepts come into the picture:

1. Bit depth: The length of the binary number at each measurement is called “bit depth”.
2. Sample rate: The number of times a measurement is taken is called “sample rate”.

As you can imagine, both bit depth and sample rate are correlated to audio quality. If your sample rate is high, you, can take finer measurements. This would help you capture the amplitude of the sound wave at each interval more accurately.

Similarly, the larger the bit depth, the more information you can store in it.

In normal CD-quality audio, the sample rate is 44,100 Hz. That is, a sound signal's amplitude is sampled and measured at 44,100 times per second. In other words, the sample rate is 44,100 Hz.

CD-quality audio's bit depth, meanwhile, is 16-bit. This means that each measurement is stored in a 16-digit binary number (i.e. a string of 16 x 1s and 0s).

For those of you doing the math, this is a tremendous amount of computation – 44,100 measurements each second, 16-digits for each measurement (which equals 16 x 441000 = 705,600 digits per second).

And that's just for CD-quality audio. Even better audio files can be created with a sample rate of up to 192,000 Hz and bit -depth of 24-bit (which would mean 4,608,000 calculations per second).

How an External DAC Helps

As you can imagine, all these calculations aren't easy. The DAC has to accurately estimate the amplitude of each wave and translate it into a binary code (and vice-versa). And it has to do it hundreds of thousands of times each second.

If there are any errors in the estimation or calculation, the resulting sound will not be as accurate as the original analog signal.

Then there is the concept of “jitter”.

Jitter is defined as a digital timing error. To accurately capture an analog signal, the best budget DAC has to estimate the amplitude, play/store it, estimate again, and so on.

If the digital circuitry is poorly designed, there can be minute lapses in this estimate-play process. This is called jitter, which can add extra distortion to a audio signal.

This is where external DACs come into the picture.

External DACs are designed specifically for taking over the digital-to-analog conversion duties. Their circuitry is more efficient. And modern DACs even have internal digital clocks to reduce digital timing errors, aka “jitter”. Which is to say, the audio is “high resolution” – quite like the difference between 480p and 1080p video.

Think of an external DAC vs your computer's onboard DAC as the difference between a power drill and a hammer & chisel. Both can drill out a hole, but the power drill is going to be faster and more accurate.

An external, standalone DAC will vastly improve the accuracy and “cleanliness” of the sound. Since there is less jitter, you won’t hear as much harmonic distortion. The difference between your computer’s DAC and an external DAC in terms of clarity is mind-blowing the first time you hear it.

What Are the Different Types of DACs?

The first time you’re introduced to the world of DACs, it’s a revelation.

There are so many types of DACs and so many brands that it’s almost shocking you never heard about this product category before.

(But that’s the case with most audiophile equipment – obscure gear, even more obscure brands, and a confused mess of newbies.)

For most users, however, DACs can be classified into the following categories:

1. Desktop DACs

2. Portable DAC

3. Headphone DACs

4. Component DACs

Questions to Ask Yourself Before Buying a DAC

I’m not going to lie – buying a DAC isn’t easy. Especially if you’re completely new to the world of high-end audio. There are no familiar brands and the list of features is so variable that you can get mighty confused easily.

So before you make a decision, there are a few questions you should be asking yourself:

What kind of audio files will you use?

Here's a fun fact: CD-quality audio has a bit rate of 1,411 kbit/s.

Standard MP3-quality? Just 128 kbits/s.

This means that CD-quality audio is approximately 11x better than MP3 audio.

And herein lies the problem with DACs – most people simply don't have the raw files to fully utilize their converters.

If you're going to stream music from YouTube and Spotify, your raw file quality is simply not good enough to do justice to your DAC.

Don't get me wrong, a DAC can make any track sound better. But to really use it, you'll have to feed it high-quality audio files. Spotify, Soundcloud, YouTube just don't cut it.

So think about this. If you don't have access to high-quality audio files, don't spend too much on a DAC. A $3,000 Benchmark DAC will fall flat if you feed it a highly compressed MP3 file.

What system will you connect the DAC to?

Do you plan to use the DAC primarily with your phone? Or do you intend to run it through your home theater system?

This is a fundamental question when buying the best budget DAC, yet something people often overlook.

A phone-specific DAC, for instance, needs a built-in power source (i.e. a batter). Otherwise you're going to be tethered to a USB power outlet all day.

With a desktop computer, you likely have more space and thus, can afford to plug in a dedicated desktop DAC.

With a laptop, you're likely going to use the DAC on the move. Yet you'll have access to USB power. Hence, a thumbdrive-sized portable DAC would be perfect for you.

And finally, if you have a home hi-fi system, you need plenty of power and significant amplification. You also have access to AC power. A component DAC, thus, would be ideal for your needs.

How good are your speakers/headphones?

A $500 DAC would be wasted if you're going to use your Apple earbuds with them. You need a set of headphones/speakers that can match the quality of your DAC.

At the very minimum, you should have an entry-level audiophile-grade headphones/speakers. A set of Audio Technica M50x or beyerdynamic DT990PRO should be your baseline (~$150).

Otherwise you're going to have a stellar audio signal, but no way to actually hear it in all its glory.

What About Amplifiers?

In conventional standalone DACs, the signal output from the DAC is not strong enough to be heard over headphones/speakers.

In such cases, you would need to add an amplifier to your mix. The amplifier would take the signal from the DAC, amplify it, and make it audible to you.

Plus, a good amplifier would further improve the “cleanliness” of the audio.

With an amplifier, your audio setup would look like this:

Of course, that's only for high-end standalone DACs. Most of the best budget DACs often come with a built-in amplifier that can boost signals enough for headphones/speakers.

You'll need an amplifier only if:

1. Your standalone DAC does not have an amp
2. Your headphones aren't loud enough
3. Your computer sound card or MP3 player or phone outputs a very high output impedance. This causes your headphones to be voiced differently than they were originally tuned for. An amp, in this case, would “tune” the headphones correctly.

For most budget DACs, you won't need an external amp. But if you have the spare budget, I always recommend you buy an external amp – it greatly improves audio quality.

Oh and there are preamps as well, which boost the signal before it enters the amp. But that’s a whole other story (and something you don’t need if you’re looking at the best budget DACs).

What kind of cables will you use?

I’m not going to make the Monster Cables pitch and tell you that the latest gold plated, diamond encrusted, sapphire platinum cables are going to magically turn your home audio into studio quality. But I am going to tell you that cables make a difference – a small, but substantial difference.

Good cables facilitate the transfer of audio signals without distortion or outside noise. Your cheap $2 cables are fine if the signal itself is muddy (as it is in most onboard DACs on phones/computers).

But if you’re already spending hundreds of dollars on the best budget DAC to clean up the signal, it makes sense to use better cables as well.

What cables you buy will depend on your DAC, of course. Cambridge Audio's DacMagic 100, for instance, supports optical and S/P Dif digital input, plus RCA output. Quality cables will make the sound quality through any of these ports better.

Don’t splurge on cables (unless you have a $3,000 amp + DAC system), but don’t be cheap about them either.

What’s your budget?

Being an audiophile is the fastest way to go broke.

Trust me, I’ve been there.

You can fall into the trap of thinking that you need every system – a preamp, an amp, a DAC, high-end headphones – to get the most out of your audiophile hobby.

And it’s very easy for this obsession to go out of hand.

Before you consider buying your first DAC, I recommend doing some serious research about what you want vs what you can afford. Set aside a budget. And don’t overshoot it.

This is a seductive world; the latest shiny gear can make you want to splurge. Especially if you hang out around other audiophiles who always like to tote their latest addition.

For a budget audiophile system, you shouldn’t have to spend over $300 ($150 for headphones, $150 for a DAC). Increase the budget a little and you’ll find some fantastically competent DACs in the $200-$300 range (Cambridge dacMagic and Sony PHA-1A come to mind).

If you’re on a small budget, it’s always better to spend extra on headphones than on a DAC.

Final Words

All of this can be a little intimidating if you’re new to the world of audiophilia. Hopefully, this guide helped you a little.

Feel free to leave your questions below or send me an email if you have any doubts.

In the meantime, here’s my list of the best budget DACs again:

• Best overall: AudioQuest DragonFly Red
• Best entry-level: FiiO K1
• Best for phones: FiiO A3
• Best for desktops: Audioengine D1

For recommendations, questions, or doubts, send me an email – I’ll jump in and answer as soon as I can.