How to pick the best credit card
Published: December 29th, 2021
Estimated reading time: 6 minutes.
Choosing the right credit card is important because it will determine how much credit you have available and what types of purchases you can make with that credit.
A credit card may seem like an easy way to buy things without having cash on hand, but if you don’t use your credit card responsibly, then using one could quickly cost more than just paying in cash.
Make sure that you only spend money that you already have in your bank account, because if not then you run the risk of going into debt (and we definitely don’t want that!). And, be sure to always pay your credit card bill on time so you don’t get charged any extra fees or interest.
When it comes to choosing the best credit card for yourself, there are a few factors that should be considered:
How good is your credit score? Do you want rewards points or cashback? What kinds of fees does this credit card have (annual fees, interest rates, foreign transaction fees, late payment fees, etc)?
Choosing a credit card can be very overwhelming, so here are some tips to help you make the best decision for your needs.
Which type of card is right for me?
There are a few different types of credit cards to choose from, and each one has its own benefits and drawbacks. The most common credit card types are regular or unsecured, secured, travel, student, rewards, and business credit cards.
Each type of credit card has its own set of features that may be more or less advantageous for you, so it’s important to do your research before applying for any card, but here is a brief overview of each.
Secured and unsecured cards
If you have don’t have a good credit score or just want to build your score up without the risk of debt, several banks on the market offer ‘secured‘ cards which require that you deposit a certain amount into a savings account (usually around $500) and then use that as collateral for your card. If you don’t make your payments, then the bank can take the money in the savings account to pay off what you owe them. This is a good way to start building credit because it shows that you’re able to make regular payments on your credit card.
Most credit cards fall into the ‘unsecured‘ category, which means they don’t require any deposit in order to apply. One downside to this type of credit card is that the interest rates are typically higher (because there’s no collateral), and it may require a higher credit score, but they usually offer better rewards than secured cards.
Student
Student cards are typically unsecured and aimed at students with little to no credit history, but can be a great way to build your credit history and increase your credit score. They come with a lower credit limit, but often offer rewards, though not as generous as traditional unsecured cards. These are great cards for students just starting out.
Rewards
Rewards credit cards give you points or cashback on your purchases, and you can then use those points to get cash, gift cards, airline miles, hotel rooms, clothing items – the list goes on! The idea is that it’s ‘free’ money because you’re getting something in return for shopping, but the rates and fees on these credit cards can be very high (percentage-wise) which means it could end up costing you more to make purchases with this credit card if you don’t pay on time.
Travel
A travel credit card is specifically designed with travelers’ needs in mind. Travel credit cards typically offer rewards points (like miles) on every purchase and often come with benefits like rental car insurance, lost luggage protection, and emergency medical coverage. They often have annual fees, so you’ll want to make sure you’re getting the most of the rewards to make the fee worth it.
Business
As the name suggests, business credit cards are designed for people who own their own businesses. These credit cards are aimed at business owners who want to keep track of their expenses. They offer features like spend tracking and reporting, employee cards, numerous protections, perks, rewards, and credit limits that tend to be higher than personal credit cards.
What credit score do I need to get approved?
The credit card issuer will check your credit score before handing you a credit card, and this credit score determines if they will approve your application or not. If your credit score is low then you may not qualify for the best credit cards on the market, but that doesn’t mean that you can’t apply for any cards at all. Some credit cards require applicants to have no credit history whatsoever (for example, secured or student credit cards), so finding these types of cards could be beneficial to building up your credit rating over time if it’s not currently high enough for a traditional card.
For the best chances of getting traditional rewards or travel credit cards, you’ll want to make sure your credit score is at a minimum of 680, but the higher the better, and it can really depend on the card you are interested in. If you find that your score is not high enough, one of the best ways to increase it is by simply using your credit cards and paying your balance in full and on time every month, but you may need to get a different credit card first to build your credit. Click here to learn a bit more about what a credit score is and how you can improve yours.
Credit card fees
Regardless of which card you choose, you will need to be aware of the various fees that can be associated with them. These fees can include annual fees, late payment fees, over-the-limit fees, balance transfer fees, and cash advance fees. When you’re first starting out, you’ll want to avoid cards that have high annual fees, or any annual fee at all, and make sure you can afford to pay your credit card bill in full and on time every month so you don’t have to worry about any interest or late payment fees.
As your credit improves, you may find that some of the most expensive credit cards with regard to annual fees also offer some of the best rewards and perks. These can include generous cashback rewards for your purchases, travel insurance, and protection, access to airport lounges, and certain discounts and experiences not available anywhere else. Depending on your spending, these credit cards can absolutely be worth your time and their rewards can outweigh their cost in many cases. To determine if the fees are worth the benefits, you will need to evaluate your personal situation and compare the rewards you will be taking advantage of vs the cost of the card.
The best credit card
Choosing the best credit card is going to depend on your specific needs and what you’re looking for in a credit card. Do you want a card that offers travel rewards? Or one that focuses on cashback? Maybe you’re looking for a credit card with no annual fee or one that has a low-interest rate. No matter what you’re interested in, there is definitely a credit card out there that will fit your needs.
If you’re someone who likes to travel, then a travel credit card may be the best option for you. For people who are trying to build credit or who don’t travel often, then an unsecured credit card with no annual fee would probably be best. It all depends on your personal situation and needs.
The best way to find the right credit card for you is to do some research and compare different cards. Read reviews and look at the benefits and fees associated with each one. Once you’ve narrowed it down, apply for the one that seems like the best fit and wait to see if you are approved. If not, either wait to build your credit score a bit more or apply for another card that doesn’t require as high of a score and work your way up from there. Having multiple credit cards for different situations is absolutely fine as well, but try not to open too many in a short period of time as it can lower your credit score temporarily.
In conclusion, taking the time to research and compare credit card options is crucial for finding the best one that suits your needs. By carefully examining the terms and conditions, you can ensure that the card aligns with your financial goals and spending habits.
Remember, a credit card can be a valuable tool for building credit and earning rewards, but it can also lead to debt if not used responsibly. Therefore, it is wise to choose a card that aligns with your budget and provides benefits that match your lifestyle. With a little diligence and research, you can select a credit card that works for you and empowers you to make smart financial decisions.