When picking a card, the best tip is to know yourself and how you will use the card. So, the ideal credit card for you is determined by a number of factors, including your needs, prior planning, and objectives.
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A credit card is a bit like a hammer — it’s a very handy tool, but it’s also capable of causing damage if used improperly. The same advice applies to both of them — choose the right tool for the job, and follow the safety rules.
“There are so many cards that are out there,” says Howard Dvorkin, Consolidated Credit Counseling Services founder and author of “Credit Hell: How to Get Out of Debt.” “People have to sit down and think about what’s important to them.”
Do you want to earn rewards, improve your credit score or have access to funds in an emergency? When figuring out how to choose the best credit card for you, it’s important to consider how you plan to use and pay for it.
So when you choose a credit card, you should take the following six steps:
1. Check your credit score
Your credit score will play a big role in determining what kind of card you’ll qualify for. Generally, a score of 700 or higher will allow you to get a rewards card with a sign-up bonus or a promotional interest rate (and a relatively low regular APR).
There are many ways to check your credit score, but not all of them are free. Fortunately, issuers such as Discover and Capital One offer services that allow you to check your score at no cost, even if you’re not a customer. And if you have other credit cards, chances are some of them will include your free FICO score, updated monthly, in your online account.
You can also request a free copy of your credit report at AnnualCreditReport.com. You are entitled to one free report from each of the major credit bureaus —Equifax, Experian and TransUnion — per year. The bureaus are also offering free credit reports on a weekly basis through 2023 due to the COVID pandemic. Review your report for any items that may be holding down your score, including errors or high card balances.
2. Determine how you will use the card
Even before you choose a card, you should determine how you intend to use it. Are you the kind of person who will pay off the card every month without fail, or do you anticipate carrying a balance from month to month? Are you going to use it to pay for everything or just for emergencies?
Answering these questions will help you narrow your search and find the card that’s going to work the hardest for you.
Building credit with a credit card
If you’re going to pay the bill in full every month, the credit card interest rate doesn’t really matter to you. Look for the best card with no annual fee and a longer grace period so you don’t get hit with a finance charge. Paying your bill on time and in full is the best way to establish and maintain strong credit.
Pay off debts with a credit card
If you’re going to transfer a balance, you want the lowest possible interest rate or, better yet, a low introductory rate. The best balance transfer cards offer a long 0% introductory APR period, during which you can work on paying off your balance without accruing interest.
Earning rewards with a credit card
If this is going to be your go-to card for most of what you buy, look for a card with a generous credit limit and a solid rewards program. You can earn points, miles or cash back with rewards credit cards and make a little bit of cash while you spend or put points and miles toward your next vacation.
Using a credit card for emergencies
If you’re only going to use the card for emergencies, go for a no-frills card with a low interest rate and minimal fees. A credit card is only a good solution for an emergency if you have a plan for paying it off. Otherwise, your credit card could end up being far more expensive than paying for the emergency with cash. Before you consider using a credit card for an emergency — like a broken water heater or a medical expense not covered by insurance — budget for an emergency fund.
3. Consider the interest rate
On a credit card offer, the interest rate appears as the APR — or annual percentage rate. It can either be a fixed rate or a variable rate tied to another financial indicator, most commonly the prime rate.
With a fixed-rate card, you know what the interest rate will be from month to month, whereas a card with a variable rate can fluctuate. However, even a card with a fixed interest rate can change based on certain triggers, such as paying your card — or any card — late or going over your limit. Or because the credit card issuer decides to change it. Yes, they really can do that; they just have to notify you.
Remember that the interest rate matters only if you’re carrying a balance from month to month. If you pay your statement balance in full each month, you can avoid interest entirely.
4. Review fees and penalties
Interest isn’t the only charge you have to watch out for. Common charges include fees for balance transfers, cash advances and foreign transactions. There are also penalty charges for paying your bill late or going over your credit limit (they don’t decline your card; they just sock you with a fee for it).
Look for cards with reasonable fees. For balance transfers, for example, look for introductory offers with no balance transfer fees and 0 percent interest for at least 12 months.
“This is a crucial issue,” says Eric Tyson, author of “Personal Finance for Dummies.” “You might not intend to carry a balance. But before you agree to accept a card, understand all the terms and conditions because your situation might change … Stay away from ones with exorbitant fees and high late fees, even if the other features seem relatively attractive.”
5. Look at rewards
The best rewards credit cards offer the ability to earn cash back, points or miles on purchases you already make on a regular basis, such as groceries, dining out, streaming services, gas or anything else. If you can spend responsibly, why not pay with a credit card that will give you something in return?
Look for a program that offers flexibility, such as cash or travel rewards that are easy to earn and redeem. And find out if rewards expire or if there are any limitations on how many points you can earn or how many you must earn in order to redeem them.
And while long-term value is key, one-time perks can be valuable, too. Many rewards cards offer sign-up bonuses if you meet a certain spending threshold within a few months. You might get a few hundred dollars in cash back, a pile of airline miles or a hefty sum of points.
6. Complete your application
Making the decision is the hard part. Once you know which credit card you want, all you have to do is apply.
The easiest and quickest way to apply for a credit card is on the issuer’s website. The application will ask for some basic information like your address, Social Security number and annual income. You may include any income you have a “reasonable expectation of accessing,” including your spouse’s or relatives’ income if applicable.
Before you hit “submit,” read through the terms and conditions. It may be tedious, but it can save you from surprise fees, egregious interest rates or other misunderstandings that detract from the card’s value.
If you’re not sure what kind of card you’ll qualify for, tools such as CardMatch can steer you in the right direction. CardMatch can help you get special card offers and pre-qualified matches with no effect on your credit score.
Learning how to choose the best credit card for you is just a matter of deciding what’s financially important to you. How you plan to use it should also influence your decision in choosing a credit card to add to your wallet, so review your spending habits, credit score and card interest rates to when you’re searching for the right card. Once you make your decision, apply for the card on the issuer’s website and wait for approval.
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.