How to Choose a Credit Card

In our last blog, we discussed the benefit of using your credit card vs your debit card.  But what credit card should you choose?  There are endless varieties of credit cards, and one card may benefit you more than another.  If you feel overwhelmed when picking a credit card, you are not alone.  What follows are steps you can take help you narrow down your options and pick the credit card that best suits you.

1.) Check your Credit Score

Before you apply for any credit card, you first need to know your credit score.  There are numerous websites available where you can check your credit score.  Although credit issuers look at more factors then just your credit score, you can eliminate credit cards that require ratings above your credit score.

2.) Find Cards with Benefits that Best Suit You

After you have narrowed your search to eligible credit cards based on your credit score, you need to decide what benefits best suit you.  There are three basic benefits for credit cards: build/improve credit, low interest rate and rewards.

• Build, Repair, or Improve Credit

If your credit score was less than ideal, improving your credit score should be a top priority.  Credit building cards can help you build, repair, or improve your score if you use them responsibly.  This means low credit utilization and paying your bill on time and in full every month.  The most notable credit building card is a secured card.

• Low Interest Rate

If you need to carry a balance or finance long-term expenses on your card, a low interest rate card may be best.  Look for cards that offer 0% APR for a specified time.  Pay attention to how long the 0% APR lasts and how long it will take to pay off your debt.  By the time 0% APR expires, you should have the debt paid off.  Keep in mind, to qualify for 0% APR your credit score must be good to excellent.  Here is a list of credit cards with 0% APR.

• Rewards

If you have good credit and you pay off your bill every month, reward credit cards can work for you.  Rewards can be many things, but some common examples are cash back, miles or points.  Credit issuers reward you for spending in common categories (travel, gas, groceries).  Before you apply for a rewards card, think of the rewards that best suit you.  If you travel a lot, airline miles may be best.  Are you always at the grocery store?  Cash back for groceries could work better than miles.  Here is a list of top reward credit cards.

3.) Compare the Cards

The third step to selecting a credit card is to compare the offers.  Assess the interest rates, fees and penalties that go along with each card.  Interest rates only truly matter if you carry a balance.  Make sure you read the fine print and understand all the fees that come along with your card.  You do not want to be hit with fees that can be avoided.

Choosing a credit card is an important decision, but it does not stop there.  Using your credit card the right way and making your spending work for you is just as important.  A credit card is not free money.  Stay within your means and pay off your balance every month.  Whether you are trying to build credit, finance a project or earn rewards, the credit card you choose should help you achieve your financial goals.