icon of two gears to show concept of expanded lessons Expanded Lesson 5 min read

What Are the Best Credit Cards? Choosing a Credit Card That Is Right for You

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Interested in signing up for a new credit card? Choosing a credit card can be daunting for some consumers. With so many vendors and options to choose from, these cards may look alike. However, every type of option comes with its pros and cons. Making the right decision all depends on your finances and what you’re looking to achieve with the card. From credit scores, interest rates, and valuable rewards, the terms of the card can have a major impact on your finances. Use this guide to find the right credit card based on your needs and lifestyle.

Yellow notepad with pen svg icon Lesson Notes:
  • Credit card offers may vary depending on the lender and your credit history.
  • Select a credit card that suits your financial goals, whether it’s for rebuilding credit, saving on interest or accruing credit card rewards.
  • Before applying for a card, be aware of things like annual fees and introductory offers that end after a certain period.

Know Your Credit Score

The first step to getting a new credit card is to understand your credit score. Banks, credit unions and other lenders will use this score to determine which cards and plans you qualify for. A credit rating is impacted by your spending habits as a consumer. The higher the score, the more likely you are to pay off your debt and make payments on time.

You can request a free copy of your credit report from each credit bureau by visiting AnnualCreditReport.com. If you request more than the three free credit reports in a year or you want to get your credit score, you may have to pay a fee. Review your full report to understand your credit history. If your score is lower than you were expecting, view our article, "What is a Good Credit Score?", for tips on how to improve your credit rating. Improving your score could make all the difference in the credit cards and interest rates you qualify for.

Focus on Your Goals

Once you know your credit score, think about what you’re looking to achieve with the card. A credit card will help you buy things on credit, but you shouldn’t take on more debt than necessary. Taking on small amounts of debt and paying it off on time can help you improve your credit score. You can also use these cards to earn rewards and cashback on everyday purchases. Decide on which features are most important to you.

Consider these options based on your goals:

Rebuilding Credit

If you have poor or no credit, consider a student credit card or secured credit card to build up your credit score. These cards can help consumers develop or improve their credit scores.

Some student credit cards are specifically marketed towards students registered with a qualifying institution. If you’re a student, you may qualify for a low-interest credit card with a lower spending limit to help you build credit as a new consumer.

Unlike traditional credit cards, secured credit cards require an initial cash deposit and have a lower spending limit. The deposit is used as collateral in case you can’t make your payments on time. The bank or credit union may keep the deposit if you should default on your debt. If you make your payments on time, the deposit is usually refundable when you close out the account. Consider secure credit cards to build up your credit score, so you can qualify for a traditional card in the future.

In order to rebuild your credit, make sure the lender or credit card company will report your payments directly to the credit bureaus, so you can raise your score as quickly as possible.

Save on Interest

If you have a high or moderate credit score, you may be able to lock in a credit card with low interest rates. Monitor the annual percentage rate (APR), or interest rate. Many lenders will try to appeal to consumers looking for the lowest possible interest rate. Some cards may come with a 0% APR for a limited period of time, such as three, six, or twelve months. Once this initial period expires, the full APR will kick in, so make sure you understand the full terms and conditions.

If you have existing debts, consider using a balance transfer credit card. This essentially consolidates your debts into a single monthly bill, helping you manage your payments with ease. Oftentimes, you can also take advantage of lower interest rate offers. This consolidation, however, often comes at a cost. Be prepared to pay between 2-6% of the amount transferred in balance transfer fees. Some balance transfer cards may waive the interest rate for the first few months, so be sure to pay off as much of your debt in the short-term as possible before the traditional APR takes effect.

Earn Rewards

Many credit cards come with valuable rewards and signing bonuses to attract consumers with high credit scores. To take advantage of these points and benefits, you may have to pay off your balance in full every month without incurring interest. You can find credit cards with rewards for everything from gas to groceries to travel.

It’s important to remember that, in some cases, the higher the reward, the higher the APR. You may end up paying more than usual if you cannot pay the balance in full and start incurring interest. These cards are best suited for low-cost everyday purchases that you can easily pay back on time.

Questions to Ask

With these tips in mind, consider the best card to fit your needs. Make sure you read the fine print before signing on the dotted line, so you know all the terms and conditions associated with the card.

Are There Any Fees Involved with Setting Up or Using the Card?

Ask about surprise fees before applying for a credit card. Some lenders may charge you an annual fee, which may outweigh the purpose of signing up for the card. Other cards may require you to make at least several purchases a month and if doing business overseas, some may charge the occasional foreign transaction fee.

Will the Lender Report My Payments to the Credit Bureau?

Building or improving your credit score can take a while, so make sure each payment works towards your goal.  According to the Fair Credit Reporting Act, your information, including payments, can be supplied to credit reporting agencies. However, it doesn't require that lenders report it either.  While some lenders may report to all three credit bureaus, others may only report to one or two of them. Keep in mind, however, while all payments may not be reported, paying your bills on time is the most effective way to build credit.

Can You Upgrade to a Better Card?

If you’re having trouble qualifying for the card of your dreams, you may need to settle for a card with a higher APR. Ask the lender if you can upgrade to a better card later on, assuming you make your payments on time. It’s usually better to stick with the same bank or credit union instead of switching every few years. Find a reliable financial partner to help you reach your goals.

For more information about choosing a credit card, use the debt calculator below to find out how long it will take you to pay off your debt.

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