There are so many types of credit cards out there, from universal cards that can be used almost everywhere to retailer-specific charge cards. And every card comes with some type of benefit, including cash back rewards, special pricing and airline miles, to name a few. With so many options out there, you may wonder how to choose the card that works best for your spending habits and broader financial strategy. Below are three questions to help you determine which credit card is right for you:
What will you use the card for?
Understanding why you need a credit card will help you determine what options best fit your needs. Some things to consider are if the card is for business or personal use, what types of purchases you plan to make and when you plan to pay them off. If you plan to carry a balance, for instance, you likely want to look for a card that has a low interest rate rather than one that offers rewards. There are even credit card options for those looking to build (or rebuild) credit.
PRO TIP: Some cards offer 0% interest on balance transfers. You might consider this option if you’re carrying a large balance on a card with a high interest rate. Depending on the balance, this strategy could save you money, especially when you are making regular payments on the card to pay down your balance faster.
What features matter most to you?
With so many features out there, it’s important to look at how they factor into your financial strategy.
For some, fee-less cards are crucial, but the key is to think through how fees balance out with any rewards. For example, a low annual or no annual fee card may net less in rewards. However, the fee may be worth it depending on the discrepancy and your spending habits. If you plan to travel abroad, you may also want to consider if there are any associated fees for using your credit card in other countries.
PRO TIP: Pay attention to when your introductory APR expires. Some cards will offer 0% APR on purchases for a certain amount of time. Be sure to pay off the entire balance before this rate expires to avoid paying interest.
What perks and rewards fit your lifestyle?
One of the enticing features of certain cards are the perks that come with it. Some cards offer cash back for specific purchases, like food, entertainment, travel expenses or groceries. Consider how often you make these types of purchases and if any fees or other features offset the benefit to you.
Be aware that some cards limit the amount of rewards that you can redeem. Check the fine print and be sure to factor that into your decision-making. Similarly, keep an eye on communication from your credit card company, as some rotate their reward categories.
If you frequently travel, you may want to consider a card that provides hotel points or airline miles. Some companies offer sign-up bonuses, which may activate after a certain purchase threshold is met.
No matter what rewards or perks you’re interested in, it’s important to consider a holistic picture of how the various features, rewards and perks come together to fit your financial needs.
