With the seemingly endless array of credit card options available, it can be difficult to decide which credit card is the best for you. Banks, credit unions, networks, retailers, national credit card companies, and others, all issue credit cards with a variety of benefits and perks.
From airline miles and cash-back rewards to concierge services, rental car insurance, and store-specific savings, it can be an overwhelming task to learn about all the different types of credit cards, along with each of their numerous features and benefits, before jumping in and deciding which one to choose. Especially if it’s your first time applying for one.
Luckily, we’ve put together a thorough list of questions to ask yourself along with other factors for you to consider, to help you decide which personal or business credit card options suit your needs best before choosing which ones to apply for.
Credit Card Considerations
Why do you need a credit card?
Some people may want a new credit card to transfer a balance so they can save on interest for a few months. Others may use it primarily for work expenses, just for travel, or as a way to build credit.
All of these reasons and several others are common, but they do not always dictate the same card as the correct choice for each person. It is important to look at why you need a credit card first and decide on the general type of card you need before getting caught up with all the other features a card may have to offer.
How much do you plan to charge to the card?
After the above question, you should think about how much you plan to charge on the card. Although the credit limit won’t be completely in your control, it will help you eliminate a few credit cards.
Perhaps you’re a college student building credit and want to maintain a low limit to not get yourself in too much debt at any one time. Or, conversely, you’re a business owner who is seeking a card with no credit limits in order to put ongoing large purchases on it. These spending habits or needs help determine which cards may be a smart fit.
How often will you pay the account balance in full?
Do you plan to pay off the entire balance each month? If so, perhaps a card with a higher interest rate or higher annual fee with much better reward perks would be best for you. If you plan on carrying a balance, you may want to stick with a lower interest-rate credit card rather than one with the best rewards. If you have an excellent credit history report and score you might even be able to get both!
Having a card with high-interest rates or annual fee can add to the strain of paying off a credit card balance over time. Be sure to take an honest look at your planned spending habits and payment patterns before making a decision.
Are you extremely loyal to one specific company, such as a gas station, bank, airline, retailer, etc.?
Some credit card companies offer great benefits to use their card at a specific retailer or merchant. If you know that you only fly on American Airlines for instance, and travel often, you may want to look at which cards they have to offer.
Perhaps you only fill your vehicles up at ExxonMobil. They probably have a credit card for you, as most major fuel centers offer credit cards to their customers. Just try not to pick one that’s going to box you into a particular shopping arrangement that will only suit your lifestyle for a while. Unless you want to of course.
Other Points to Consider When Comparing Credit Cards
Annual Percentage Rate (APR) isn’t everything.
The stated interest rate alone may not be the best indicator of the right card for you. The way APR is calculated can vary from card to card, and aspects of the credit card’s costs such as annual fees, teaser rates, rewards, and bonuses should all play a role in the decision as well.
Credit card perks may hurt you.
Credit cards with rewards, like miles, cash back, or discounts, may have higher interest rates or annual fees which may make for a worse deal than a card option without some of these bells and whistles. However, if you know your spending habits and rarely carry a balance, some of these cards offer impressive rewards that can pay off. It’s important to see the true savings of specific rewards compared to increased finance charges or other fees. Be sure to weigh all the pros and cons.
Am I truly pre-approved?
Offers coming in from the mail often proclaim that you are ‘preapproved’ for their credit card and may even include a fake card with your name on it to get you excited about what’s to come. In reality, pre-approval doesn’t account for much these days.
It simply means the issuer is at least somewhat aware of your creditworthiness. You are still required to call in, send a response via snail mail, or go online to complete an application for final approval. If you do apply and get approved, it may or may not be at the same terms stated in the pre-approval letter.
Key Questions to Ask Yourself When Shopping for a New Credit Card
Although the right credit card will not be the same for every individual, a few questions should help each person find the ideal card for themself once they’ve decided on the type of card they need.
- Is there an introductory APR? What is it and how long does it last? Does it include purchases and balance transfers, or just one or the other?
- Is there a sign-up bonus?
- What type of rewards does it include: cash back, miles, points, etc.?
- What are the spending categories and how much does each of them pay?
- How much are the balance transfer fees?
- Is there an application fee?
- Is there a processing fee?
- Is there an annual fee?
- What is the late payment fee?
- What’s the over-the-limit fee?
- What’s the grace period?
- If I go over the limit or pay late will my terms change?
- Can I pay online, and are there any savings for signing up for online-only statements?
When picking a credit card, it’s also a good idea to think about your current credit rating and future credit needs. Secured cards can benefit people with a poor credit score and regular unsecured credit cards typically allow you to increase your credit limit above and beyond what the average person needs.
Once you receive it in the mail, be sure to use your new credit card wisely.
