With the endless array of credit card options available, deciding which credit card is the best for you can be difficult. Banks, credit unions, networks, retailers, and national credit card companies 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 overwhelming learning about the different types of credit cards and their numerous features and benefits, 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 to consider, to help you decide which personal or business credit card options best suit your needs 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 to, so they can save on interest for a few months. Others may seek it primarily for work expenses, just for travel, or as a way to build credit.
All these reasons and several others are common, but they don’t always dictate the same card as the correct choice for every person. It’s 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 in all the other features a card may have to offer.
– How much do you plan to charge to the card?
After answering the above question, you should consider how much you plan to charge on the card and how often you expect to use it. 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 so you don’t get into too much debt. Or, conversely, you’re a business owner seeking a card with no preset credit limits to put large purchases on regularly. These spending habits and needs help determine which cards may be a smart fit for you.
– 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 annual fee with a much better reward 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 be able to get both!
Having a card with high-interest rates or an annual fee can add to the strain of paying off a credit card balance over time. Before deciding, review your current spending habits and payment patterns, and how they relate to your planned goals.
– 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 entice you 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 an American Airlines-branded credit card.
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 will box you into a particular shopping arrangement that will only suit your lifestyle for a while.
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 a credit card’s costs, such as annual fee, teaser rates, rewards, and bonuses, should all play a role in your decision.
– 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 can make a deal worse than an 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’re ‘pre-approved’ for their credit card and may even include a fake card with your name engraved to get you excited about the potential buying power.
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 apply and get approved, it may or may not be at the same terms mentioned in the pre-approval letter.
Receiving a pre-approval advertisement usually means you have a stronger chance at getting approved for the offer than one sent with a ‘pre-qualification’ letter, but there is no guarantee.
Key Questions to Ask When Choosing a New Credit Card
Although the right credit card will not be the same for everyone, a few questions should help you find the ideal card once you’ve decided on the type you 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 kind of rewards does it come with (cash back, miles, points, etc.)?
- What are the spending categories, and what reward percentage does each pay?
- How much are the balance transfer fees?
- Is there an application fee?
- Is there a foreign transaction fee?
- Is there an annual fee?
- What is the late payment fee?
- What’s the over-the-limit fee?
- What’s the grace period?
- Will my terms change if I go over the limit or pay late?
- 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, while unsecured credit cards typically allow you to increase your credit limit above and beyond what the average person needs.
Don’t seek out cards you know you won’t qualify for, because too many applications could hurt your credit over time. Seek out cards with the best terms, rewards, benefits, and perks, based on your income and credit score qualifications.