How to Choose the Best Credit Card for Your Needs and Goals
There are plenty of lists online featuring the best credit cards, but how can you pick one that will meet all your requirements? The fact is that no credit card will work for every single individual, as everyone has different credit scores, preferences, and needs. In this article, you can learn how to choose a good credit card based on its features, benefits, and other factors.
What Types of Credit Cards Are Available?
How do you choose a credit card that you will be satisfied with? In short, you need to take a close look at the features of credit cards, their benefits, and whether you can be approved at all for getting them. Here are the most widely used types of credit cards:
Cash-back credit card
This is a popular category of credit cards, but cash-back options vary depending on which one you select. For instance, you may receive cash back on specific spending categories (eating at restaurants, purchasing groceries, traveling, etc.). Or, there may be a reward rate used for all purchases. In some cases, there may be rotating categories to which cash-back applies. It is best to check all the cash-back conditions and pick a card based on your regular purchases.
Rewards credit cards
Rewards cards are similar to cash-back ones, but they generally provide you with points based on how much you spend. Depending on the card, there may be different ways to redeem such points. Rewards credit cards work well if you use them for some categories of purchases you always make (groceries, gas, household items, etc.).
Student credit cards
How do you pick a good credit card if you are a student? There are credit cards aimed specifically at students who don’t have an extensive credit history. This category of credit cards is easier to be approved for, and they typically don’t have annual fees.
Secured credit cards
Another type of credit card you should know about is a secured one. When you sign up for this card, you have to make a deposit, which will be used as your line of credit. The benefit of this card is that you can get one even if your credit score is far from ideal. Usually, you have to deposit at least $200, and this sum will be returned to you if you close your account, or it is upgraded.
Travel credit cards
These cards are perfect for people who travel a lot and want an opportunity to get additional rewards. The benefits may differ from card to card, as some allow you to earn points, while others give you cash back on travel-related purchases. There may also be specific programs for those who frequently fly or stay at specific hotels.
Choosing the Best Credit Card with Suitable Features
We reviewed the most widely used types of credit cards. However, it is also crucial to focus on other factors other than just a type that will influence how much you will be able to benefit from a card.
Consider what rewards you will get
The way you spend your money using a card should determine what reward programs will work best for you. There are numerous reward types, as cards commonly offer points, miles, and cash-back. There is also a difference in how such rewards are redeemed. For instance, you may collect points and exchange them for travel accommodation. Or, your points can be converted into gift cards or statement cards.
Make sure to check your credit score
How to choose the best credit card if your credit score is far from perfect? The first step is to know the exact score, as this will determine your further actions. There are numerous cards with excellent conditions that require you to have a great credit score. However, there are also cards for those with a score of 669 and below. The same goes for people who may not have a significant credit history.
Secured cards are a common choice for those building credit, and it’s generally recommended to make a deposit on the lower side for credit score purposes. For instance, you may deposit $400, which will be your credit limit. As you improve your score, it will become possible to upgrade to cards that offer better conditions.
Consider fees and interest rates
What else do you have to know about how to pick a credit card? When choosing a card, it is vital to check whether it has specific fees. The most common type is an annual fee, but it is also one that you can avoid by picking a card without it. It is also important to look up whether there are any late payment fees and those that apply to foreign transactions.
As for interest rates, many credit cards provide individuals with a zero-interest introductory period. This is a particularly great option for people who want to get out of debt, as they will get no interest on purchases for an established period. In some cases, this period may last for a year or more.
It is certainly a great idea to make large purchases during your 0% APR, as you will save money. However, it’s essential that you pay them off while the period lasts. You should also remember that cards with this feature generally require a good credit score of 670 and above.
Picking the best credit card is extremely important, especially if you plan to use it on a daily basis. Numerous cards are available, and you should consider your financial goals, credit card score, how you spend your money, and other factors when choosing one. A suitable credit card can help you improve your credit score or provide you with regular cash-back, making shopping more cost-efficient.
What factors should I consider when choosing a credit card?
When picking a credit card, you should consider its potential rewards/cash-back, annual percentage rate, presence/absence of annual fees, travel bonuses, and more. It is also critical that your credit score meets the requirements for the card.
How do I determine my credit card goals?
The essential step is to think about how you plan to use your credit card. If you travel a lot, you may benefit from a travel-focused credit card. If you don’t have a good credit score, you may need to get a secured card and make a deposit.
What are credit card introductory offers?
When choosing a credit card, you may see introductory offers and rates. It means that such perks are provided for a limited time, usually up to a year. It is important to be aware of how long such offers last, as you may be surprised by a sudden rate increase or other changes.