How To Choose A Credit Card In 7 Easy Steps
A credit card is a lot like a relationship, it can be full of fun and excitement, but if you aren’t careful it can end in heartbreak. When choosing a credit card, you’ll most likely be in a long-term relationship. Understand your options and ask yourself the right questions. As your matchmaker, I will help you create a beautiful life with your credit card with these 7 easy steps.
1. Decide On The Primary Use Of The Card
The most important step in your decision-making process is to pinpoint why you want to get a credit card. Do you want to be able to travel more often? Do you want to get more out of your daily spending? Do you need debt consolidation or business funding?
If you want to travel, a card with travel rewards would be best for you. If you require debt consolidation or business funding, look at cards with low-interest rates or credit cards specifically for businesses.
Set a goal and do your research to decide what card options would be best for your desired use.
2. Analyze Your Credit
Do you have good or bad credit? Be honest and realistic with yourself when choosing a credit card. The best credit cards require good credit scores. The better your score, the higher the chance you have of being approved for a card with better rewards.
Other factors can also play a role in qualifying you for a credit card. You might be declined for a credit card even though you have a great credit score and pay your balance on time. Contributions that can lead to credit card denial include the length of time you’ve had credit, your debt-to-income ratio, and having too much debt.
Free resources to check your credit score:
- Free FICO score from credit card issuers
- Credit Bureaus (Equifax, Experian, and TransUnion)
If your credit score doesn’t warrant preferable credit card options, don’t freak out. There are ways to improve your credit, from modifying your spending habits to making consistent on-time payments. Also, consider getting a secured credit card if your credit needs improving. This card requires a cash security deposit, making them a good option for people with less satisfactory credit scores.
3. Look At Your Spending Habits
Do you plan to pay off the credit card every month or hold a balance? Are you only using it for “rainy day” emergencies or will it be used daily? Consider your spending habits when choosing a credit card, especially if you’re not planning to carry a balance. This means finding a credit card that you can use to your advantage.
- If you plan to carry a balance, look for a card with the lowest interest rate possible.
- If you’re going to pay the bill every month, look for a card with no annual fee.
- If your card will be used daily, look for a card with a generous rewards program and credit limit.
- If your card will be used for “rainy day” emergencies, look for a card with minimal fees and a low-interest rate.
Many cards give bonus rewards points and cashback for specific purchases. Think about your frequent purchases and the card that will complement your lifestyle. Some cards provide rewards for:
- Travel purchases, such as hotels and airline tickets
- Business purchases
4. Research The Credit Cards Available To You
Once you decide on how you will mainly use the card, research the specific types of cards within that card category. Card categories include:
- A travel credit card
- A balance transfer credit card
- A business credit card
- A cashback credit card
- A card with 0% APR
- A secured credit card
- A premium credit card
5. Narrow Down The Best Rewards
After pinpointing your card category, make a list of the cards that make the most sense. It’s important to get a card with rewards you will use.
What card will give you the best value for your current lifestyle? If your goal is to save money on groceries and shopping, earning points on those purchases might be ideal. If you’re planning multiple trips for upcoming holidays, a card that rewards you in travel mileage and hotel stays might be best.
Credit card options are vast, so to prevent yourself from becoming overwhelmed, create a list of 3-5 cards and narrow it down from there.
6. Compare Offers And Conditions
Key features of a credit card to pay attention to include:
- APR: The interest you pay on a card when you carry a balance. Many cards advertise 0% APR for the first 12 to 18 months, then interest goes up.
- Balance: The total amount owed on a credit card, including fees. Interest, and purchase charges. Higher balances lower your credit score.
- Sign-up Bonus: A special bonus for meeting certain requirements. Gives credit card users a way to earn rewards quickly. You have to meet spending requirements within a specific time frame.
- Credit Limit: The maximum balance you can hold on a credit card at one time. You may be charged a fee for exceeding your credit limit.
- Rewards: The points you earn on specific items via credit card spending. These may equal 1-2% of your general spending or specified purchases like gas and groceries.
- Annual Fee: Sometimes there is an annual cost to having a particular credit card.
- Other Fees: Some cards have a foreign transaction fee if you use your card while abroad. You may also want to look into late fees, balance transfer fees, or fees for cash advances.
- Unique Perks: Some cards come with extra perks like concert and movie tickets, roadside assistance, gym memberships, Uber credits and more.
7. Apply For A Credit Card
After you have compiled all your research, pick the card that is right for you. You can apply online and get the answer within a few minutes, depending on your credit history.
Remember a relationship takes effort and it may not always work out the first time. Every few years, come back to these seven steps and make sure you still have a card that best fits your lifestyle.