In the event that you are well-informed about the available choices and adeptly inquire about pertinent matters, you will be able to identify the most suitable match for your spending patterns and objectives.
The process of discovering the most suitable credit card can be likened to a combination of artistry and scientific analysis.
It is essential to recognize that no single credit card can claim superiority over all others in every category or for every individual. However, armed with knowledge about the available options and skillful inquiry, you can pinpoint the card that aligns perfectly with your spending patterns and credit status.
To achieve this goal, adhere to these four steps, and you’ll be well on your way to finding the best credit card for your unique needs.
Step 1: Assess your credit Begin the process of finding the best credit card by evaluating your credit status. This step is crucial as it helps you determine which credit card offers you may be eligible for based on your credit score. Remember, a higher credit score enhances your chances of being approved for cards with more attractive perks. Here are various ways to check your credit score:
a) Several credit card issuers offer cardholders access to free FICO scores.
b) The three major credit bureaus, namely Experian, Equifax, and TransUnion, offer credit scores for purchase.
If the revealed credit score isn’t what you anticipated, delve into your credit reports to identify the root cause of any issues. This step allows you to take corrective actions to enhance your credit, such as adjusting your spending habits or contesting inaccuracies on your reports, if necessary. Under federal law, you have the right to obtain one free copy of your credit report from each major bureau every 12 months. Obtain your complimentary credit reports from the federally authorized website AnnualCreditReport.com.
Step 2: Determine the suitable credit card type for you next, identify the specific category of credit card that aligns with your requirements. There are generally three main types of credit cards available:
a) Credit cards designed to assist in rebuilding or establishing credit when it’s limited or damaged.
b) Credit cards that offer money-saving benefits on interest payments.
c) Credit cards that provide rewards for your spending.
Selecting the best card for you involves considering features tailored to meet your individual needs. For instance, if you don’t frequently travel, a travel rewards card, no matter how exceptional, may not be the most advantageous option for you. By understanding your personal preferences and spending habits, you can pinpoint the credit card type that suits you best.
If your primary goal is to build or rebuild credit, two suitable options are the student credit card and the secured credit card. Student credit cards are unsecured cards designed for college students new to credit, making them relatively easier to qualify for compared to other types of credit cards. On the other hand, secured credit cards require a security deposit of $200 or more and provide an opportunity to improve credit. The deposit is refundable when the account is closed or upgraded in good standing.
For those seeking to save on interest, there are three potential choices:
- Low-interest credit card: A credit card offering a consistently low interest rate is beneficial if you anticipate using the card for emergencies or if your income fluctuates, and you might carry a balance at times.
- 0% APR introductory offer card: If you expect to carry a balance and want to avoid interest charges for a specified period, a credit card with an introductory 0% APR can be an excellent match.
- Balance transfer card: If you have high-interest debts, a balance transfer offer can help you pay off the debt interest-free for a certain duration.
It’s worth noting that finding these interest-saving offers may be more challenging if you have average or poor credit.
If your objective is to earn rewards from your credit card spending, you have several options to consider:
- Rewards credit card: This type of card suits you best if you consistently pay off your balance in full each month, avoiding any interest charges. Rewards credit cards often have higher Annual Percentage Rates (APRs), but they come with attractive sign-up bonuses and offer points, miles, or cash back for every dollar spent.
- Travel credit card: If you frequently travel, a travel rewards credit card might be the ideal choice. These cards offer travel-related perks, such as airline miles, hotel points, or other travel benefits, which can be advantageous for globetrotters.
- Cash back credit card: Opt for a cash back credit card if you prefer straightforward rewards. With these cards, you earn a percentage of cash back on eligible purchases, allowing you to accumulate savings over time.
When selecting a rewards card, it’s essential to evaluate your spending habits and payment behavior to maximize the benefits without incurring unnecessary interest charges.
To narrow down your choices and find the most suitable credit card, it’s crucial to ask the right questions. Follow these guidelines:
For student and secured credit cards:
- Will this card contribute to building my credit? Ensure that the card you choose reports your credit card payments to the three major credit bureaus, as this is essential for improving your credit score. Some secured cards may not offer this benefit, so it’s essential to verify before making a decision.
- What are the costs associated with opening an account, including any annual fees? Typically, the rewards offered on student and secured cards are not substantial enough to justify paying an annual fee. If your credit isn’t severely impacted, you can likely find options without this cost. When considering secured cards, opt for one with a lower security deposit, although bear in mind that your credit limit may be directly tied to the amount of your deposit.
- Can I upgrade to a better card in the future? Select a card that allows you to build your credit over time and provides the opportunity to upgrade to a card with more favorable terms. This way, you can keep the card open for a more extended period, which positively affects your average age of accounts in the long term. This can be beneficial for your credit history and score.
When considering low-interest, 0% APR, or balance transfer credit cards, it’s essential to ask the following questions:
- How long is the 0% APR introductory period, and what is the ongoing interest APR? Look for a credit card that provides a sufficiently long 0% APR period, giving you ample time to pay off your debt without incurring any interest charges. Additionally, if you anticipate carrying balances over several years, consider a credit card with a consistently low ongoing APR after the introductory period ends.
- What is the card’s balance transfer policy? If you’re planning to conduct a balance transfer, research the card’s balance transfer fees. Find out the types of debt you can transfer and whether there’s a limit on the amount you can move to the new card. It’s essential to be aware that the balance transfer APR on a card may differ from its purchase APR.
- Does the card offer rewards? If you’re seeking a card with only a few months of 0% APR (instead of prioritizing a sign-up bonus), explore the possibility of finding a card that also offers generous ongoing rewards. This way, you can benefit from rewards while enjoying the 0% APR period, making it a more rewarding credit card option overall.
When evaluating rewards, travel, or cash-back credit cards, take the following factors into consideration:
- How do you typically spend your money? Opt for a credit card that offers the highest rewards for the categories you spend the most on. If you tend to spend a significant amount, consider a card with an annual fee if the rewards you earn outweigh the cost of the fee. Additionally, if you plan to use the card for international transactions, choose one with no foreign transaction fees to avoid extra charges.
- How complex is the credit card’s rewards system? If you prefer a straightforward approach without dealing with limited award seat availability, spending caps, rotating bonus rewards, and loyalty tiers, consider a card that provides flat-rate cash-back rewards. This way, you can earn rewards easily and without navigating through various restrictions.
- How quickly will you earn rewards, and how much are they worth? Understanding the value and pace of rewards accumulation will help you make an informed decision and select the most beneficial credit card for your needs.
Once you have narrowed down your choices and are left with two or three similar cards, determining the card that offers the highest overall value can be challenging. In this tiebreaker round, scrutinize the cards closely to identify any distinguishing factors. Here are some additional considerations that might set a card apart:
For student and secured cards:
- Credit limit increase: Check if any of the cards allow for an automatic increase in your credit limit after making a few consecutive on-time payments. This feature can be advantageous as it offers the potential to access a higher credit limit in the future.
- Interest on your deposit: Some secured cards place the security deposit in an interest-earning certificate of deposit (CD). This means that you can earn a small amount of interest on your deposit over time, providing an additional benefit to consider.
By carefully assessing these differentiating factors, you can make an informed decision and choose the credit card that provides the highest overall value and aligns best with your financial goals and preferences
When considering low-interest, 0% APR, or balance transfer cards, here are two additional factors to consider:
- Debt payoff planner: Some credit card issuers offer a valuable tool that allows you to create your personalized debt payoff plan through their online portal. This feature can be immensely helpful if you’re dealing with significant debt and need a structured approach to manage and pay it off efficiently.
- No late fees or penalty APR: Certain credit cards waive late fees and penalty APRs. This can be particularly beneficial in situations where you might encounter difficulties in making timely payments. Having this feature on your card can provide peace of mind and flexibility during challenging financial times.
By taking these aspects into account, you can further refine your choices and select the credit card that provides the most comprehensive benefits and support for managing your debt effectively.
When evaluating rewards, travel, or cash-back credit cards, consider these two additional factors:
- Lower required spending for sign-up bonus: Look for credit cards that offer sign-up bonuses with lower spending requirements. The less you need to spend to qualify for the bonus, the more accessible and attractive it becomes. This can be a significant advantage, especially if you don’t have substantial planned expenses that align with the minimum spending requirements of some cards.
- No expiration date on rewards: Some credit cards offer rewards without an expiration date, allowing you to retain and redeem your earned rewards as long as you keep the card open and in good standing. This feature ensures that your accumulated rewards won’t go to waste, providing you with more flexibility in redeeming them for maximum value.
By considering these additional features, you can refine your options further and select the credit card that offers the most favorable terms and perks for your reward preferences and spending habits.
Absolutely, when applying for a credit card, you can include all income sources to which you have reasonable access. This includes not only your personal income but also any other funds that you can use to make credit card payments. For students, this could include money received from grants, scholarships, or allowances provided by parents. For others, it may involve including a partner or spouse’s income if you share finances.
Including all relevant income on your credit card application can improve your chances of being approved for the card and may also increase your credit limit, allowing you to better manage your expenses and build credit more effectively. However, it’s essential to be truthful and accurate in reporting your income to avoid any issues with the credit card application process.
After finding the best credit card for your needs, it’s essential to use it wisely to maximize its benefits and achieve your financial goals. Here are some key steps to take:
- Establish and build credit: If your goal is to establish or improve your credit, ensure you pay your credit card bill in full every month. Avoid using too much of your available credit (aim for a low credit utilization ratio) and make on-time payments consistently. This responsible credit behavior can boost your credit score over time.
- Utilize 0% APR wisely: If you obtained a credit card with a 0% APR introductory offer, stick to your debt payoff plan. Take advantage of the interest-free period to pay off existing debts or finance necessary purchases without incurring interest charges.
- Earn rewards effectively: For those focused on earning rewards, use your credit card for everyday purchases to accumulate points, miles, or cash back. However, always pay your credit card bill in full every month to avoid interest charges, ensuring that the rewards you earn don’t get offset by interest payments.
- Monitor your credit card activity: Regularly review your credit card statements and track your spending to maintain control over your finances. Report any suspicious or unauthorized transactions to your credit card issuer immediately.
By using your credit card responsibly and sticking to your financial plan, you can make the most of your credit card’s benefits and achieve your financial objectives efficiently. Remember, the credit card you choose should align with your needs and help you achieve your goals, so it’s crucial not to settle for anything less. Continually reassess your financial situation to ensure your credit card remains the best fit for your needs over time.
