We can not claim that a specific credit card is better compared to all other cards of all classification, or for all people. What makes it best is when we find the right credit card that answers to our spending habits and credit conditions.
So how do we find the “right card” for us? Below are simple basic steps that we hope can help you find this card:
Step One. Review your credit
See if your credit score can qualify you for the credit card that is being offered to you. Basically, the better credit score, the greater chances you have of being approved for credit cards with better bonuses and privileges. To check your credit score:
Major credit players such as Equifax, Experian, and TransUnion
Most of card issuers provide free FICO scores
Major financial institutions provides free official FICO credit score
If the number you see is not what you are expecting, review your credit reports and see what is causing the discrepancies. You can begin to find ways to improve it such as changing your spending habits to dispute the error on your credit reports, if necessary.
Federal law stipulates to give us a free copy of our credit report from the three major credit bureaus every twelve months. You can get your free reports from Annual Credit Report, which is federal-authorized site.
Step Two. Determine the type of credit card that you need
The three basic types of credit cards are the following:
- Cards that assist you improve your credit even if it is damaged or restricted;
- Cards that earn rewards; and
- Cards that help you save money on interests.
So, what is the right card for you? It should be the card with features created to meet your specific spending needs. If for example you do not travel a lot, those travel cards will not give you much benefits.
If you want to build or rebuild your credit score, you may get student credit cards or secured credit cards.
Student credit cards are unsecured cards that are designed for college students who are new to credit. These cards are easy to qualify for compared to other types of credit cards. Secure credit cards are those that require you to deposit $200 or even more. This deposit is given back to you when the account is upgraded or closed in good standing condition.
If you are looking for a card that help you save on interests, find credit cards with low-interest zero % APR, or balance transfers.
Cards with introductory 0% APR and ongoing low interest can be a good match for you if you are planning to use your credit card only in case of emergency, or if your income is irregular and you carry a balance from time to time.
Balance transfers can assist you in paying off high interest debts – interest-free. Remember that these offers may be very difficult to find you have average or poor credit score.
If you want to earn rewards, try rewards, travel or cash back.
Rewards credit card is perfect for those who pay off their balance in full every month and interest-free. However, these cards have higher APR although they offer bigger sign-up bonuses and earn you points, miles, or even cash back on every dollar that you spend.
Step Three. Filter your options by asking the right questions
Write your preferences and options or find credit card comparison and find the kind of credit card that fits your credit score and practically meets your monthly spending habits.
Student and secured credit cards:
- Will this type of card help me build my credit score? Major credit bureaus provide reports of your credit card payments where most secured cards do not.
- How much will it cost to open an account which includes annual fees? These types of cards offer rewards that are not high enough to guarantee annual fee. If you have very poor credit, avoid this expense. But for secured cards, the lower security deposit that you give, the better. However, your credit limit may be bound directly how much of a deposit you make.
- Will you be able to graduate to a better card later? Opt for a card that will allow you to build credit and upgrade to a card with more competitive conditions. This means that it will be easier to leave your card open for a longer time and increase your average age of accounts over time.
Low-Interest, Zero% APR, Balance transfer cards
- How long can we enjoy the zero% APR period and what is the current interest APR? Opt for a card that provides you with sufficient period to pay off your debt for interest-free. If you plan to carry balances over year, go for a credit card with low current APR.
- What is the policy for balance transfer card? If you are doing balance transfer, go for a card’s balance transfer fees. Learn the types of debt that you can transfer and know if there is a restriction as to how much you can transfer. Take note that balance transfer APR on a card may differ from the purchase APR.
- Does the card offer rewards? If you are considering a few months of zero % APR, instead of choosing a sign-up bonus, go for a card that offers generous ongoing rewards.
Rewards, Travel, or Cash-Back Cards
- How do I spend my money? Find a card that offers the highest rewards for categories that you spend your money most on. If you are a huge spender, opt for a card with annual fee and if your reward earnings might offset the cost. If you will be using the card overseas, find a card that offers no-foreign-transaction-fees and with chip-and-PIN features, instead of chip-and-signature capability which is standard in U.S.
- Is this type of card complication? If you do not like features with restricted award seat availability, rotating bonus rewards, spending caps, and loyalty tiers, opt for a credit card with flat-rate cash-back rewards.
Related Article: Important tips for using credit cards while travelling overseas
Step Four. Get a card that offers the highest overall value
Review thoroughly for the unique differences where all other values seem to be equal.
Student and Secured cards
- Credit restrictions automatically increase. There are some cards that allow you to increase your limit after several, consecutive on-time payments.
- Interest paid on your deposit. There are several secured cards that place your security deposit in an interest-earning CD.
Low-Interest, Zero % APR or Balance Transfer cards
- Debt payoff planner features. Several issuers allow you to create your own debt payoff schedule through an online site. This is a great tool if your debt is overwhelming.
- No-late fees or penalty APR. Some cards do not offer these charges but if you fall behind on some payments, this card can be very useful.
Rewards, Travel or Cash-back cards
- Lower need for spending. This means that lesser that you spend to qualify for a sign-up bonus, it will be better.
- Without expiration dates on rewards, as long as you keep this card open.
Finally, when you have chosen a card that fits your spending habits, always remember that on the application, you should include all income that you have access to, not only your personal income. For students, you can include money from scholarships or grants, and even allowances that you receive from your parents. For others, include your spouse’s earnings.
Getting the right credit card that help you in your spending habits is indeed a very important decision to make. But it does not stop there. Always use your credit card the right way so you can get the most for the value of your money.
If you want to build good credit, always pay on time and do not use too much of your available credit. Follow faithfully your debt payoff schedule if you have a zero % APR deal. If you want to get rewards, use your credit card for daily purchases and pay fully your bill each month.
Bottom line, the credit card that you personally choose must help you attain your financial goals within the most affordable and efficient way, whether you want to establish a good credit score, or borrow money, or earn rewards.