How to Choose the Right Credit Card

Are you wondering how to choose the right credit card? This isn’t an easy task since there are so many available, and you’ll need to take into account various things such as your lifestyle, your needs, and the kind of card suitable for your credit score. Luckily, we’ve researched for you so you can find all the information you need below.

As mentioned, there are a few things you need to decide before picking the best credit card for you.

Check Your Credit Score

It’s imperative that you first check your credit score because it will determine which credit cards you can qualify for. If you’re looking to get a top reward credit card, you’ll need to have good to excellent credit. If your credit isn’t as good as you need it to be, be sure to spend time increasing your score before applying for a credit card.

Furthermore, every time that you apply for a credit card, you’ll incur a hard inquiry on your credit report, which will drop your credit score for the next two years. Doing this too many times may decrease your chances of getting credit approval in the future. You can, however, check if you prequalify for a card with an issuer by using their website — while this isn’t a guaranteed approval, it can give you a sense of how likely you are to be approved.

Choose a Card that Suits You Best

When you have a sense of where your credit score is, you’ll be able to focus on which card will work best for you. There are plenty of cards to choose from, so it’s best to weigh in on the pros and cons of each and understand how they will work with your budget, goals, and credit standing. In general, you’ll have a few categories to choose from.

• Credit-building cards: These are great if you need more time to improve your credit. They also come in a few different types, such as student cards, secured credit cards, and unsecured cards.

• Balance transfer cards: You can transfer debt from one credit card to a balance transfer card that has a lower annual percentage rate (APR), giving you the chance to save on interest and eliminate your balance.

• Low-interest credit cards: This is a great fit if you need to carry finance expenses for the long-term while minimizing your interest charges. These cards come in two forms, either a 0% introductory APR on new purchases or at a lower rate compared to the usual credit card APR.

• Rewards credit cards: These cards are typically available for those with good to excellent credit, where you can earn points or cash back through sign-up bonuses.

Pick a Credit Card that has the Best Value

When choosing the right credit card, you need to ensure that it provides you with the most benefits. Here are just a few things to look for:

• Credit line increases: Look for a card that rewards responsible usage through credit line increases.

• Earning interest from deposits: Some credit card issuers will put your deposit into a CD that earns interest, so you can get some of your money back.

• Length of 0% offer: You can find some cards that offer this for as long as 21 months.

• No late fees or penalty APR: If you fall behind on payments, you could be charged with a penalty APR or huge fees. If you’re worried about this, consider a card without fees.

• Type of rewards: There are various kinds of credit card rewards, such as airline miles, cashback, and loyalty points.

• Low or no annual fees: While rewards cards will offer great perks, they will often come with annual fees. If you don’t wish to pay annual fees, many other cards don’t come with a yearly fee.

• Low required spending: If you’re aiming to get a rewards card, be sure to look for one that has a low spending requirement to get the most value from your card.

If you’re looking to get an idea of the credit cards available in the market, here are a few of the best ones along with important details.

Learn About the Terms and Fees of the Card

Before you get excited about which card you can get, there are a few more things that you need to familiarize yourself with to avoid the pitfalls that usually come with owning a credit card. Banks and credit card issuers make money by using fees and interest. Be sure to research these fees in advance to understand the added costs when applying for a new credit card.

Credit Card Terms and Conditions

The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) of 2009 have helped to set the standard on credit card terms and conditions, making it much easier to understand them. The terms and conditions of a credit card will lay down all the fees and interest you may collect as a cardholder. This document will provide you with the most important details you need to know about your credit card, such as:

• The APR for purchases

• The APR for balance transfers

• The APR for cash advances

• The penalty APR

• The grace period

• Minimum interest charge

• Annual fee

• Fees for balance transfers

• Fees for cash advances

• Fees for foreign transactions

• Fees for late payments

• Fees for a returned payment

Interest rates

The interest rate for credit cards won’t be the same for each one. Some cards offer interest rates in the lower single digits, while others may charge a whopping 36%. Either way, a credit card’s APR should be one of the biggest considerations in your decision especially if you think you could incur a balance.

Fees

Much like interest rates, credit cards also carry a wide range of fees where you may encounter some of the most common ones such as:

• Annual fees: These may range from $95 to over $550, but some prime credit card issuers may waive their annual fees in the first year.

• Late payment fees: If you make late payments, you could be charged a fee that depends on how many times you’ve been late and on the issuer.

• Cash advance fees: Cash advances should be avoided as much as possible because the fees associated with them can be huge — around 3% to 5% of the amount you withdraw.

• Balance transfer fees: This can be a good option if you’re struggling to pay a high-interest credit card. The fees will usually be around 3% to 5% of your transfer amount.

Foreign transaction fees: Using your credit card outside the country will earn you a foreign transaction fee, which is typically around 3% for each transaction.

Rushed Decisions Can Be Expensive

Now that you know what to look for, and have some ideas as to what would be considered a good credit card to own, be sure to take your time to do the research. There are many online groups where you can ask other cardholders how their experiences with a particular card have gone. You’ll find most of the responses positive and helpful if you’re able to find the right groups. Reddit can be a decent resource for this. Quora also has some good answers to common credit card questions as well.

Also, have an idea of how you foresee yourself spending your money. Amazon, for example, has a pretty solid rewards program for shopping on Amazon. I found the terms reasonable and the points worthwhile. Therefore I chose to apply for credit and use the card and have found it a positive experience.

Conversely, in my early teens, I just wanted to have a credit card. I wound up with a dud from a fairly popular bank that provides credit on pretty poor terms. Had I taken the time to do the research I would’ve avoided the credit card altogether.

Good luck and I hope you find a credit card that works for you. Feel free to ask any questions or mention your favorite cards in the comment section below.