5 Things You Should Consider When Choosing Which Credit Card Is Right for You
-
Written by
Paige Cerulli
-
Edited by
Levi Leidy
When you’re thinking about applying for a new credit card, the options can be overwhelming. Most credit cards today offer appealing rewards and perks that enhance the value you get from the card. So how do you know which is right for you?
Just like any other financial decision, you’ll need to carefully weigh your options. Pay close attention to these five factors to better understand which credit card is right for your lifestyle and financial goals.
Check Out: Essential Dos and Don’ts for Using Credit Cards Wisely
Read Next: Ways To Elevate Your Summer Travel Adventures
APR
Every credit card has an annual percentage rate, or APR. This rate refers to how much interest you’ll pay if you carry a balance on the card. Factors like your credit score can affect a card’s APR — if you have excellent credit, for example, you may qualify for a lower APR. Many cards have a fixed APR, meaning your interest rate won’t change, and some have variable APR, so the interest can fluctuate over time.
If you plan to pay off your balance every month, you should be able to avoid paying interest as long as you make those payments on time. Some credit cards offer introductory periods with low or no APR. If you’re planning to make a large purchase that you can pay off before the end of the introductory period, this type of card could be helpful.
Remember that a credit card’s APR can also vary depending on your charges. For example, the purchase APR is applied to any purchases you make, but that card might have a different APR for balance transfers. Consider how you’ll be using the card and review all of the APR details when deciding if it will work for you.
Rewards Structure
Credit cards offer many appealing rewards, but look for a rewards structure that makes sense for your spending and financial goals. Many cards offer you cash back on your purchases, points that you can redeem for cash or other purchases, or miles and other travel rewards.
The best rewards structure will depend on how you spend. Some cards offer a flat rewards rate for all of your spending, while others offer higher rewards on certain types of purchases, like dining. Cash-back cards tend to be the most straightforward, but if you pay attention to redemption offers, you can often leverage your rewards with a points credit card. Travel rewards may be ideal when you travel frequently and use your card to pay for travel expenses.
Fees
As you start to narrow down your credit card options, research any fees that each card carries. Annual fees are common, especially for credit cards that offer valuable rewards or perks. You’ll pay an annual fee when you first open the card, and then every year that you continue to hold the card.
Some cards charge a balance transfer fee, which is a percentage of the total amount that you transfer to the card. If you’ll be making international purchases, either online from the United States or while you travel abroad, you might be charged a foreign transaction fee; this is a percentage of the international purchases you make. Some credit cards charge you a late payment fee if you make a payment late, and some may charge a setup fee when you first open the card.
All of these fees can add up, so carefully review the credit card’s policies and make sure you’re aware of any potential fees.
Additional Perks
In addition to a rewards plan, some credit cards offer extra perks. For example, some travel credit cards will cover the application fee for TSA PreCheck membership, making your travel experience easier. Many cards will extend a manufacturer’s warranty on a purchase. Some cards include other perks like a cell phone protection plan if you use the card to pay your monthly cell phone bill.
These perks can be appealing, but sometimes cards that offer these extra perks come with higher fees, like an annual fee. Make sure that the perks are worth the other potential expenses you might face when using a card. You’ll also need to carefully read the terms and conditions of the offer to make sure you qualify for the perks you want to use.
The Type of Card Best Suited to Your Lifestyle
All of the above factors matter when choosing a new credit card, but you can also quickly narrow your choices by considering the overall type of card that’s best for your lifestyle and financial goals.
Cash-back cards may make sense if you’re planning to use the card regularly and don’t value other perks, like travel miles. The cash you earn on each purchase can quickly add up, and if you pay off your card monthly, you’ll enjoy that reward without having to pay interest on your purchases.
Travel credit cards, such as those that reward you with airline miles or come with other perks, like priority boarding or travel insurance, may be appealing if you travel frequently. If the majority of your spending goes toward travel-related purchases, like airfare or hotel stays, you can quickly earn rewards using a travel credit card.
Balance transfer credit cards can help you pay down debt when you have a balance on a credit card with a high interest rate. You can also use these cards to consolidate balances from several credit cards, simplifying the process of making your monthly payments. Since balance transfer cards have an introductory period with a low APR, it’s best if you have a strategic plan on how to pay off most or all of your balance during that introductory period before the interest kicks in.
Choosing a new credit card is ultimately a personal decision, so it’s important to weigh which factors matter most to you. If you carefully research the details of each card, you can find a credit card that’s best for your needs and that helps you progress toward your financial goals.
More From CardCritics™
