9 Tips to Keep in Mind When Choosing a Credit Card
There are a lot of credit cards available but only a select few are going to actually work for you. Here are some facts to know when picking a credit card.
When it comes time to apply for a new credit card, there are a lot of things to think about. You should never just open the first card that offers you a credit line. It’s important to ‘shop around’ for the best option.
But, what exactly should you look for when considering the best credit option for your financial situation?
If you’re unsure of the answer to this question, then you’re in the right place. In this article, we’re discussing everything you need to know. Keep reading to learn more.
Choosing a Credit Card
The first thing to do when picking a credit card is to compare your options. There are literally hundreds of different credit cards available but there are only a few that will be the best fitting credit cards for you. That’s why we’ve compiled this list of tips to keep in mind before you apply.
Promotions
First and foremost, be aware of promotions that entice you to open a card. For example, many credit card companies offer free merchandise at sporting events if you apply for their card on the spot. Opening too many credit cards at once reflects negatively on your credit rating.
Introductory Periods
When comparing credit cards, you should always look at the introductory offers. You may find cards with low to zero balance transfer and interest rate periods from 3 months to a year. Likewise, some cards waive their annual fee in the first year.
Don’t get tricked into opening a card based solely on the introductory periods, however. It’s important to weigh your options when it comes to the rest of the card’s benefits to ensure you get the best use of the card over its lifetime.
Annual Percentage Rate (APR)
Take a good look at the APR on your potential card. Unless you plan to pay your card off at the end of each month, the interest will add up quickly. Look for cards with the lowest variable interest rate that also offers other perks.
Cash Back
Check to see if the card offers any kind of cash back deals. You may earn anywhere from 1% to 3% cash back on qualifying purchases with various cards. Of course, it will depend on how you plan to use your card for the cash back deals to be of any benefit.
Read the fine print to learn how you can best use your card in order to earn the most cash back. You can apply the cash to your balance, a purchase, or have it transferred to your bank account. The terms and conditions will tell you how often you’re eligible for withdrawal.
Annual Fee
When choosing any credit card it is worth your while to consider the annual fee on the card. What are the other benefits and do they make up for the annual fee? Otherwise, you’re paying for something that you’re not using efficiently.
Annual fees can be anywhere from $39 to over $150 depending on the type of card and the company issuing it. These fees are non-negotiable. Make sure the annual fee fits in your budget before looking at the other benefits of the card.
Balance Transfers
Some cards will offer special rates for balance transfers. This can either be an introductory period or a promotion that your current card may run.
Make sure to review the terms and conditions detailing what the interest rate will be after the promotional period. Unless you plan to pay off the balance you transferred within that time, it may not be in your best interest to make the transfer.
Minimum Payment
One of the most important tips for picking a credit card is to pay attention to the minimum payment. Some cards offer a set fee such as $25 per month, no matter what your balance. Other cards may stipulate that you pay at least 3% to 5% of your balance.
It’s also important to remember that only making your minimum payment each month will result in hundreds of dollars in interest over the life of your balances. You should also try to keep your balances below 30% of the total credit limit to maintain a healthy credit score.
Charges
Make sure the card doesn’t have any types of hidden charges. Many cards will charge you for going over your credit limit. There are also often fees associated with travelling abroad not to mention late fees if you don’t make your payments on time.
Loyalty Points and Rewards
One of the most enticing things about a new credit card is the loyalty points and rewards you may qualify for. Some cards focus on air miles for travel while others offer points specifically for shopping at select retailers, grocery stores, and gas stations.
It’s best to compare the best travel credit cards and other rewards cards alike. If you don’t travel a lot, for example, a rewards card that offers air miles won’t benefit you much. You may consider a card that offers rewards for shopping instead.
Final Thoughts
Applying for a credit card is a big decision that shouldn’t be taken lightly. Make sure to follow these tips before opening a new account so you may experience the benefits of owning a credit card in a responsible way. The worst thing you can do is regret your decision and close the card, it will affect your credit report negatively.
When you’re ready to apply for a new credit card, don’t hesitate to contact us! We’ve done all the work of comparing the best credit card options on the market today.
