September 29, 2016
So you want a credit card but don’t know where to start? Or maybe you’re overwhelmed by the choices. Sure – there’s lots of options, but here’s some strategies to help determine which card is right for you.
Know your credit
The first thing to know is what kind of credit you have. There are three main credit report bureaus – Experian, Equifax and TransUnion. You can get a free copy of your credit report from each of these bureaus once every 12 months by going to AnnualCreditReport. For a small fee, you can also pay to get your credit score, which is what card issuers are ultimately going to be looking at. If you do not have any credit at all, consider a student credit card, which is geared towards folks with no credit. This list outlines the best available offerings for student cards. You can also look into secured credit cards, which require a security deposit upfront but allow you to use them just like regular cards.
How will you spend
Another factor in determining what kind of credit card you will get is how you plan to use the card. Ideally, all of the money that you charge to your credit card should be paid off in full every month to avoid interest charges and late fees. However, one of the advantages to a credit card is that you can carry a balance. If you think you might not pay it off in full every month, consider getting a card with a low interest rate. Some cards may even offer a 0% APR for 6 or 12 months which can be great if you’re planning a large purchase. Just remember that 0% isn’t forever and keep your eye on the expiration date so you don’t get hit with a bunch of unexpected fees. If you are carrying a balance from another card, look for cards that offer good interest rates on balance transfers. Just be careful of those balance transfer fees. Always read a card’s terms and conditions before signing up so you know what to expect.
Cash back or points?
Credit cards like to reward their customers in two ways – either cash back or points. Some even do both. Cash back will give you the most flexibility, but points on cards may allow you to stretch your buying power farther, especially when it comes to gift cards and travel. Consider what’s most important to you. Also be careful that most travel-specific cards like airline and hotel cards usually carry an annual fee. If you find that you use that company or if you’re saving for a trip, the fee may be worthwhile. However if you only travel them occasionally, you may find another card more beneficial to you. You can use this quiz from CreditCards.com to help find what card might be best for your spending habits.