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How to choose a credit card
Consider annual fees, interest rates and rewards programs.
Picking the right card can feel overwhelming as there are so many options available. But by doing a little research, you can find one that best suits your spending habits and financial situation.
For example, you might want a card with cashback rewards, or one with travel rewards. You could also choose a card that helps you save money on interest and fees or one that helps you pay off your balance more easily. Whatever you’re looking for, it’s important to do a bit of research on your options first.
What's in this guide?
How to select a credit card that’s right for you?
Because there are so many credit card options, here’s what to consider before choosing a card:
- What’s your credit score? Having the perfect credit opens up almost unlimited credit card options. But if you have poor credit or no credit history, look for a card that reports your activity to all three major credit bureaus — Experian, Equifax and TransUnion. Students typically get to apply for better cards.
- Where do you spend most? If you need a credit card for everyday purchases like gas, groceries or dining, consider a cashback card; If you travel often, either a hotel, an airline cobranded card or a general travel card would work; Specialized cards offer the highest rewards rate on select categories of purchases, which also includes select stores like Amazon or Walmart.
- Do you often carry a balance? A card with an ongoing low APR would help you avoid high additional costs, but if you’re looking to make a large purchase and pay it off without interest for as long as possible, look for a 0% intro APR credit cards.
- Do you need to pay off another card’s debt? In this case, look for 0% intro APR credit card on balance transfers. This way you can move your other cards’ balances and pay them off without interest. Keep in mind there are some restrictions, such as the amount you can transfer and you can’t transfer your balance between affiliated banks.
- Do you want additional benefits? Depending on your lifestyle, you can get travel perks like free checked bags, priority boarding or lounge access, or you can get shopping perks like purchase and price protection. Some card issuers offer entertainment programs with preferred tickets and seats for cardmembers.
- Do you want a complementary card? Getting an additional card should be easy. Look for the perks you’re missing with your current cards and apply for a card that offers them.
Which credit card is best for me: A quick look
Need a quick overview of which card could best fit your needs? Here’s a quick overview of our general suggestions:.
How you plan to use your credit card…
Type of credit card to apply for…
|Refinance or consolidate other credit card debt||A credit card that has 0% APR on balance transfers.|
|Get rewards on all purchases||A credit card that has cash back or rewards for every purchase.|
|Build your credit||A credit card that reports activity to all three bureaus and offers free credit scores.|
|For business expenses||A business card the has rewards in line with your business spending.|
|Traveling in foreign countries||A travel card with no foreign transaction fee and travel based incentives.|
|Carry a balance from month to month||A credit card with 0% or low interest.|
|Reduce chances of being denied||A secured credit card.|
|Not often||A card with no annual fee with terms that are suitable for you.|
Picking your credit card
If you have an excellent credit score, your card options are almost limitless. But if you’re struggling financially, you may want to start with a secured credit card. If you’re somewhere in between, consider the following:
- Interest rates
Some credit cards come with a 0% intro APR period, meaning you won’t pay any interest on your purchases and/or balance transfers while the period lasts. But after that, the standard rate applies. Cash advances are an exception to this rule as they rarely come with an intro period.
- TIP: If you’re looking to get the longest 0% intro APR period — look for balance transfer or cashback cards issued by banks. If you’re looking for an ongoing low APR, look for cards issued by credit unions.
A rewards card could be worth considering if you want to get something back for using a credit card. Depending on the card, you could earn anything from travel miles to cash back. This type of card often comes with a generous signup bonus. If you’re ready to pay an annual fee, you could earn even more rewards.
- TIP: If you’re looking to earn rewards on everyday purchases, a cashback card is usually the best choice.
- Annual fee
In general, the annual fee represents the value of your card: The more it costs, the more perks you get. If you’re not using the card all that much, paying whatever annual fee it has might actually cost more than what you get in rewards.
- TIP: There are many cards that offer promotional $0 annual fee for the first year. This could be worth considering as you get the perks of an annual-fee card without paying the fee for the first year.
What are the benefits of rewards programs?
These are generally intended for regular card users, and the benefits vary between cards and how you use them. The principle is that the more you use your card, the more rewards you get.
The person who benefits the most from this type of card is the transactor. Because these cards tend to have high APR, carrying your balance isn’t recommended.
To make the right credit card choice, answer the following questions:
- Is there an annual fee?
- What rewards are offered?
- How much do I have to spend to earn a signup bonus and do I normally spend that amount?
- How many points per dollar can I earn?
- Do rewards points expire?
Once you have answered these questions, you’ll be one step closer to getting a solid credit card for your needs.Back to top
How to choose a credit card provider
If you know what kind of card you want, finding the right provider comes next. When you compare providers, consider the following:
- Customer service. If you are a frequent card user, it is possible that you will contact your provider on a regular basis, so make sure they are easy to reach and offer their clients excellent customer service.
- Fees and charges. When selecting your credit provider look at more than only the interest rates, check out what other charges and fees are levied on your card. Some providers may apply a penalty APR if you fail to make the minimum payment, so keep an eye on that.
- Rewards. Does the credit provider offer a good rewards program? Can you use it the way you want to? It won’t mean much to you if you earn great rewards that you may never use.
- Extra card benefits. Credit card providers can offer a number of extra benefits on their cards including travel insurance, car rental insurance, concierge service, payment protection, global and roadside assistance and more.
Comparing interest rates and fees
Other factors to keep in mind are the interest rates and fees.
Understand the interest rate variations
At first glance, it can get a bit complicated trying to navigate through the various interest rates and exactly how they apply. You can accrue interest when you:
- Make a purchase of goods or services.
- Make a cash withdrawal.
- Transfer the balance of your credit card debt to another card.
Credit card fees
When selecting a credit card, make sure you read the terms carefully, so you know exactly what will be applied and when. The most common fees are:
- Annual fees
- Late payment fees
- Returned payment fees
- Cash withdrawal fees
- Balance transfer fees
- Foreign transaction fees
Terms and conditions
By using the credit card you are considered to have accepted the contract and its terms and conditions. Prior to entering the contract, you must be advised of the following:
- Credit limit
- The APR and how it’s applied
- How the APR is calculated
- Minimum monthly payment required
- All fees and charges, and when they are payable
- How the credit provider will notify you of changes if the interest, fees or charges are variable
- Reward program details
- Details for any additional perks and features
What is a credit limit?
Credit limit, also known as a credit line, is the maximum amount you are allowed to spend with your credit card. Most credit cards have a predetermined minimum credit line, and depending on the card it can be anywhere from $200 to $500.
High-end cards such as the Visa Signature start with a minimum credit line of $5,000. Ultimately, the amount you get is determined by your credit card issuer and is based on the information you have provided in your application.
Can I increase my credit line?
When you have a credit card for a while and make regular payments, quite often your provider will offer periodic credit limit increases. This is often the case with credit-building cards.
If you need a higher credit line and you can’t wait for an increase, call your card provider and ask them if they’re willing to provide a higher credit line.
Types of credit cards
- Cards with no annual fee
This type of credit cards has the highest variety and it often comes in combination with cash back, travel rewards, 0% intro APR period and low ongoing APR.
- Cashback and rewards cards
Depending on the card, you will be paid back for your purchases in the form of cash or rewards at a certain predetermined time. Cashback cards are often used for everyday purchases like groceries, gas and dining, while rewards points are often used for travel rewards.
- Travel cards
If you’re often traveling, your credit card options include general travel cards, airline cards, hotel cards and cruise line cards. Spending money on travel categories often has the highest rewards rate. This also applies for the points redemption — you get the highest value on travel-related redemption options.Travel cards also often come with no foreign transaction fees, meaning you’ll save money on fees when you spend with your card abroad.
- Balance transfer credit cards
A balance transfer credit card could be a good choice if you have a large balance on a current credit card that you’re struggling to pay off. When you sign up for one of these cards, you get a low or a 0% APR for the first six to 21 months. When the intro APR period has expired, you will be expected to pay the standard APR, which at times can be quite high.
- Credit cards for business
If you are running a business on your own, you should look at the advantages of having a business credit card. It can make bookkeeping much simpler. You can also get extra cards for your staff to use for purchases, and you can even earn rewards on your purchases.
- Premium credit cards
This type of cards comes with many benefits and exceptional services such as a high signup bonus, high rewards rate on your purchases, dedicated concierge service, complimentary airport lounge access, companion flight certificates and more.
- Student cards
University students can apply for a special student credit card that may offer cash back, a signup bonus or low APR. These cards are also good for building credit and entering the world of adulthood.
- Credit cards for bad credit
Some credit card providers offer cards to people with bad credit rating. Usually, these cards come with no rewards, with relatively high APR and with an annual fee.Most are secured cards, meaning you have to make a refundable deposit that’ll act as your credit line. As you build credit, most providers will often upgrade you to an unsecured card.
- Store credit cards
You’ll often encounter cobranded store credit cards that come with benefits when used at the specific retailer. The highest benefit often comes in the form of deferred interest payments on your purchases if you pay the balance in full before the promotional period expires. But you can also earn cash back or points on purchases made at the store.
There’s no denying that credit cards are useful financial tools. In fact, many people don’t even bother to carry cash when they have a credit card in their wallet. But if you don’t pay off your balance on time, the interest you’ll accrue may outweigh the rewards.
Whichever card you choose, make sure to compare your credit card options until you find the perfect fit for your wallet.Back to top
Pictures: Getty Images
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