There is a seemingly endless list of credit card options to choose from. The whole process can seem overwhelming—especially if you’ve never applied for a credit card before.
Thankfully, there are some steps you can take to find out which type of credit card is best for you. Take a look at these tips we’ve included below to help narrow the choices down to a select few.
Check Your Credit Score
The first step when looking for a credit card is to take a look at your credit score. You can check your credit score online for free, and this information will give you an idea as to which kind of credit cards you can apply for.
Researching your credit is important for multiple reasons. First, you might find that your score is lower than you thought. You can take steps to improve your score—like making on-time payments—and you can attempt to settle a dispute if you find something wrong in your detailed credit report.
Second, knowing your credit score can tell you which kind of credit cards you’re eligible for. A few lenders offer credit cards for people with poor credit, and these can help improve your score before you apply for credit cards with better rates, lower fees, and more rewards.
Applying for a credit card and getting denied can hurt your credit score, so make sure you know which lenders are likely to approve your application before you start applying.
Assessing Your Needs
In this section, we’ll cover the common needs people have when shopping for a credit card. Answering these questions for yourself is a good way to determine which credit card is best for you.
There are rewards cards, low-rate cards, low-fee cards, balance transfer cards, and cards that offer a combination of features. Figuring out what you want from a card will help narrow your choices down, making the decision easier.
Do you want to get the most out of your spending habits? Do you value rewards points or frequent flier miles? If your answer to these questions was “yes,” then you probably want a rewards credit card.
These cards give points for the money you spend at select locations. Each credit card provider has its own rewards scheme.
Some only offer rewards on certain types of purchases, like travel. Some companies will offer points on all purchases, with a few exclusions for things like bank fees or gambling. Figuring out where you spend the most money and how many points you could earn can help you pare down your options for rewards credit cards.
Low-rate cards are excellent for those who want to make large purchases and pay them off over time. Your credit score shouldn’t go down as long as you make the required payments on your bill, and choosing a card with a low rate will give you better bang for your buck if you don’t intend to pay the bill off in full each month.
Some low-rate cards also offer a 0% p.a. introductory deal, which can be appealing if you want to make a large purchase immediately. Be aware that as with most introductory deals, the benefit will end after a certain time period.
Low-Fee (Or No-Fee) Cards
You’ll also encounter cards that charge a low annual fee. Some won’t charge an annual fee at all, but these often come with higher interest rates.
These cards are good for those who plan to pay their credit card bill in full every month. You can avoid interest payments by not carrying a balance on the card and will pay very little—if anything—in annual credit card fees.
This strategy is good if you want a credit card to boost their credit score. You’ll be able to improve your score by paying your bill on time, without any annual fees to contend with.
Balance Transfer Cards
These cards aren’t usually a category on their own, but low-rate, low-fee, or rewards cards that offer balance transfers.
Balance transfers are a great way to stop the avalanche of debt that can happen with some credit cards. Lenders often offer new customers 0% p.a. on balance transfers for a set period of time.
This means you can transfer your balance, stop paying interest, and catch up on payments. Be aware that there may be a fee involved when transferring a balance, and keep an eye on the new card’s interest rate, as it will kick in once the promotional period ends.
Choosing the Best Option For You
Now that you know which type of card you want, it’s time to compare your options. Look at the benefits, rates, and fees of each card before applying, and consider your spending habits. When used responsibly, credit cards can be a beneficial addition to your financial strategy.