How to Choose a Credit Card that’s Right for You: 4 Tips to Help You Select the Best Credit Card!
Are you new to building credit? Looking for ways to earn rewards?
But, not sure how to select the best credit card for yourself?
There are seemingly endless possibilities out there and choosing a new credit card can be a stressful chore. The best credit card for you may not be the best for your friend. There is no one-size-fits-all but consider these tips before submitting an application.
#1 - Credit Score
It’s important to check your credit score beforehand to know which kind of cards you’ll qualify for. Check out my article on boosting your credit score for a list of credit bureaus and other helpful tips. If you have a low credit score or no credit history yet, you may need to boost your credit score before applying for a new credit card.
Generally speaking, a credit score of 700 or more will allow you to get a rewards card or a promo APR.
#2 - Card Usage
Determine what rewards/bonus you want the card to have. Are you a traveler? Maybe you want a card that provides extra travel rewards. Are you a concertgoer? Maybe you want a card that provides early access to tickets/shows. Do you love eating out? Maybe a credit card with restaurant bonuses is a must.
Think about how you intend to use your credit card. Is it for daily purchases or just large ticket items? Do you plan to pay your balance in full each month? If not, a low-interest rate is extremely important. Are you utilizing the card for balance transfers? Then you should look for a card with low interest on balance transfers.
Are you a concertgoer? Maybe you want a card that provides early access to tickets/shows.
#3 - Interest Rate, Fees & Penalties
Consider the interest rate (APR) of the credit card. Interest will vary depending on your credit score, but many credit lenders offer incentives to start with 0% APR for a limited time. The APR will also vary for types of use: general purchases, balance transfers and cash advances.
It’s important to review all fees and penalties for each credit card. If you don’t pay the minimum balance each month, there will be additional fees or penalties. Make sure you understand the different interest rates for each type of spending and the grace period allowed (if any). Late payment fees can really add up. Many credit cards also charge an annual fee, over-the-limit fees and foreign transaction fees. Make sure you understand your card’s rates and factor in the fees before you apply.
Remember credit limits impact purchasing power. If you are a credit card newbie, consider starting with a low credit limit to make sure you are forming responsible spending habits. Be wary of no-limit credit cards because sometimes they look maxed out on your credit report, which can negatively impact your credit score. I would strongly encourage you to pay off the full balance each month to keep your credit strong and your financial position flexible.
#4 - Rewards
Not all credit cards offer rewards, but those that do provide all different types of rewards – some give cash back, others points or miles for purchases. Some cards focus on sector spending like groceries, dining out, streaming services, gas, travel, etc. It’s important to understand the rewards and select a credit card that best utilizes your spending patterns. If you can pay your balance off each month, why not select a card that also gives you bonuses for everyday spending? I recommend starting with a card with no annual fee, but some reward cards with fees eventually make sense and the benefits can outweigh the fee depending on your individual spending.
$0 annual fee credit cards based on your spending/reward usage:
Best card for dining out & entertainment
Capital One SavorOne Cash Rewards The card offers unlimited 3% cash back on dining, entertainment, popular streaming services and grocery stores. The big bonus is 8% cash back on Capital One Entertainment and tickets at Vivid Seats for those concertgoers. Currently, you can also receive $200 cash bonus once you spend $500 within the first three months. It has $0 annual fee and a current special of 0% intro APR for the first 15 months as well as 0% APR on balance transfers for 15 months (3% flat fee on amount transferred).
Best card for travel rewards
Chase Freedom Unlimited Earn an extra 1.5% cash back for the first year, so 6.5% on travel, 4.5% on dining and drugstore purchases and 3% on everything else (up to $20,000 spent in the first year). It has $0 annual fee and a current special of 0% intro APR for the first 15 months as well as 0% APR on balance transfers for 15 months (3% flat fee on amount transferred).
Best card for sector cash back
Citi Custom Cash Card Enjoy $200 cash back (fulfilled as 20,000 ThankYou Points) after spending $1,500 on purchases in the first six months. Earn 5% cash back on your top eligible spend category (restaurants, gas stations, drugstores, home improvement, streaming services, grocery stores, entertainment, etc.) up to $500 spending/monthly billing cycle. Earn 1% unlimited cash back on all other purchases. It has $0 annual fee and a current special of 0% intro APR for the first 15 months as well as 0% APR on balance transfers for 15 months (3% flat fee on amount transferred).
Making the decision is the hardest part. Regardless of your choice, keep your credit score healthy to have the most options at your disposal.