A credit card gives you the freedom to spend on the go.
The right credit card certainly can improve your life, but dozens of options make choosing a credit card confusing.
Consider several factors to help you choose the right credit card for you.
Your credit score and use of credit in the past affect your credit card offers. Lenders review these aspects of your financial health as they determine the likelihood that you’ll pay for the items you charge.
Credit scores range from 300 to 850. The higher your credit score, the better credit card terms you’ll receive, including lower interest and higher credit limits.
Making on-time payments and paying the balance in full each month could boost your credit score, too. Additionally, be aware of your credit limits. Keeping your charges well below your credit limit can improve your credit score.
Don’t worry, though, if your credit history is poor. You can choose a credit-building credit card or continue to make mortgage and utility payments on time. These steps can help you improve your credit score and the potential to qualify for better credit card offers in the future.
You may need a credit card for online purchases, airline tickets, or everyday needs. Carefully consider your specific needs as you determine which credit card is right for you.
For example, you would only need a credit card that offers airline miles if you fly frequently.
If you plan to make a large purchase, carry a balance sometimes, or use your card only for emergencies, consider a zero percent or low-interest credit card. You will save money long-term with an ongoing low-interest rate and the addition of no late fees or penalty APRs typically associated with this type of credit card.
Review the low-interest offer period before you select this card. The low-interest period may only last a few months before higher interest rates apply to your balance and purchases.
Reduce your existing debt when you select a balance transfer credit card with a low-interest or zero percent introductory offer. This card enables you to transfer debts from a high-interest credit card or other debt source and reduce your monthly interest payment. With a good credit score, you could qualify for low rates on a balance transfer credit card.
Be sure to review credit limits and fees associated with opening a balance transfer credit card. Your credit limit may be less than what you wish to transfer. Additionally, you may pay three percent or more of the amount you transfer unless you qualify for and choose a no-fee balance transfer card.
Secured and student credit cards help you improve your credit score. Ensure the issuing credit card company reports your payment habits to all three major credit bureaus and pay the balance in full and on time each month to maximize your credit-building credit card.
While you can use a credit card to improve your credit score, read the agreement carefully. Understand the fees, credit limits, and your ability to switch to a better credit card in the future. These features allow you to build credit and invest in your financial health as you charge purchases.
Buy items with a rewards credit card, and you can earn financial incentives, including cash, gift cards, and other perks. Choose a branded rewards credit card to earn incentives at specific stores where you frequently make purchases, such as hotels, airlines, or department stores.
Look for offers with a sign-up bonus, too, to accrue rewards even faster. This bonus sometimes requires you to charge a certain amount, so review the details carefully.
Generally, you will earn a flat-rate percentage of all purchases or tiered percentages based on where you shop. Some reward credit card companies also rotate earning potential, allowing you to earn more points on restaurant purchases one month and gasoline the next.
Keep in mind that the issuing bank or credit union may cap rewards, rewards may expire, and reward cards may include an annual fee and high-interest rates on unpaid balances. Track your reward points each month to ensure you maximize your earnings and don’t lose valuable incentives.
Also, calculate any associated credit card costs to ensure they don’t cancel out any rewards you will earn.
Your excellent or very good credit score could qualify you for a Platinum or Gold credit card. This type of card offers additional perks and benefits, including no liability for unauthorized purchases, extended warranties, travel assistance, and car rental insurance.
Platinum and Gold credit cards can include a high annual fee, so read the fine print in the agreement. However, the additional protection and value you gain may make this type of credit card a smart investment.
Most credit cards include fees. Carefully review the fine print on the card agreement to ensure you understand the additional charges you’ll face.
Fees can include:
Apply for or open too many credit card accounts, and your financial health could suffer.
Open credit card accounts could lower your credit score and affect your ability to qualify for credit later on, including a car or home loan. Reduce this risk when you review your options carefully, then choose one card that meets your needs.
No credit card is perfect, but you can review offers carefully. Read the fine print on each offer, and ask questions until you understand all the details.
Consider your needs, credit card features, and other factors as you select the right credit card for you.