Choosing the right credit card can be a daunting task. You must consider your credit score and eligibility before anything else. If you have at least an average credit rating, then there are a set of questions you will always want to ask. Take the time to address these common factors to determine the best possible credit card for you.
What Type of Credit Card Is Right for You?
Are you a big shopper or is your credit card more about building credit? Regular spenders can look at cashback and other rewards. A slightly higher annual fee could get offset by the amount you get credited from your incentives. Meanwhile, what if you are getting a card to build your credit score? If this is the case, you should look for one that’s affordable to maintain with minimal use.
What about the interest rate of your card? You have little control over that unless you have nearly perfect credit. The best interest rates on credit cards are typically in the 9.49 to 12.99 percent range. But remember, these rates are still high; you should not feel comfortable carrying any real amount of debt on your card.
Alternatively, borrowers with good credit can opt for a 0 percent card. This option gives you the chance to avoid paying interest for a set period. If you fail to pay off your debt in time, the accrued interest will add on. This card is appealing for sure, but you should treat it like a consolidation loan.
Choosing the Right Annual Fee
You would think the best annual fee is none, but this is not always the case. You must compare the other details of a credit card to know what it’s worth to you. The other fees could pile up on a no-fee card and make it cost more than one with, say, a $39 annual fee. Nevertheless, if you are targeting a small limit ($300-500), it would make complete sense to choose the card with the lowest annual fee.
Chase Higher Credit Limits
Are you still establishing your credit? If so, the right credit card for you would be with a credit card provider that will increase your borrowing limit over time. You can ask the company or search in Google to see what experience others have had with the same card.
Increasing your credit limit does not have to be a bad thing. Keep your debts under control, and every limit increase will result in a reduction in your debt-to-credit (credit utilization) ratio.
Furthermore, if you are starting off with a secured card, make sure you can convert it into an unsecured card at a later date. Make sure this card actually converts and doesn’t just result in a pre-approved application for a different card, as keeping the original one helps you sustain a higher average credit age.
Choosing the Right Card APR
Credit card APR rates are based on the issuer. You won’t find any super low-interest rates, but there are some cards with a 0 percent offer for the first 12 to 24 months. If you can qualify, it would be a good idea to look into those options first.
You should absolutely compare credit cards based on their APRs. The problem is that you do not know ahead of time what rate you will receive. Your creditworthiness is evaluated, and your credit report gets pulled. After that, you get an offer for the card that states the APR you will receive.
The only easy way to compare APR rates by card is to check the range. Most cards come with three variable APR rates. You can assume, based on your credit status, that two of these rates are possible for your situation. So, look for the best cards (compare other terms) in the lowest interest range.
Keep in mind that your goal should not be to carry debt on your credit cards. Therefore, going with a card with more incentives but a 1 to 2 percent higher interest rate is perfectly fine.
Check the Balance Transfer Terms
You might not make balance transfers yet, but in the future, there is a strong chance you will find them valuable. So, you should keep an eye out for optimal balance transfer terms. Start by comparing the actual fee for making these transfers. Then, check the introductory offer — in most cases, you will receive around 12 months of no interest before your transfer must be paid off in full.
The fee for making a balance transfer is often in the 3 to 5 percent range. Some of these credit cards offer a promo period where there is no transfer fee. These particular cards will serve as interest-free loans, as long as you can pay them off before the promo period is over.
Now you are ready to find the right credit card for you!
Picking the right credit card for you will take some time. You must compare the options based on both your credit status and your spending habits. Some cards offer as much as 3 to 5 percent in cash on your purchases. Make a real effort to compare the terms, as you don’t want to be sucked in by a card that’s only good on the surface.