Before going into more detail regarding the way you should choose the best credit card, you should first get familiar with a couple of other things. Namely, you should know the way credit cards work, the types of credit cards, and the cost of credit card debt.
When talking about credit cards, we simply think of a card where we have certain credit to spend. The reality is not so simple, though. Namely, there are numerous types of cards offered by banks. Credit cards can differ in terms of their purpose, benefits, issuing procedure, APR, fees, etc. Thus, the first thing before choosing your credit card should be to get familiar with the available types of credit cards.
Coming back to the process of selecting the best credit card. The process of choosing the best credit card for your needs and lifestyle imposes the need for a couple of questions to be asked. The answer to these questions could be the starting point for the selection process of the best credit card. Therefore, you should ask the following questions:
- Do you have credit card debt on multiple credit cards? Do you want to consolidate this debt? (Understand the balance transfer)
- Do you pay a high-interest rate on your current credit card(s) debt?
- Are you going to use the credit card to make purchases on a regular basis, or do you want to use it for cash purposes only?
- Do you travel on a regular basis? Is it by airplane or other means of transportation? Go through the different perks offered by the credit card issuer.
By now, you should get some pictures regarding the need you want to satisfy with your credit card. Meaning that you have decided on the purpose and the type of credit card you want. So, what’s next?
The next step is to consider some other aspects related to your financial situation. For instance, see if you can really afford a credit card. Examine the way this form of potential debt will impact your monthly budget. On the basis of your credit score, check the interest rate you would pay on your new credit card. A low credit score is associated with higher cost (APR), meaning people with lower credit scores have higher credit card costs.
After going through the issues above, the next logical step is to go through the process of choosing the best credit card.
Decide on the type of credit card you need
After answering the questions listed above, you should ease the process of identifying the best credit card for you. Thus, before proceeding to other important aspects, you should decide on the type of credit card you will need. There are numerous types of credit cards offered by banks. Some of the basic credit cards types are:
- Balance transfer credit cards – can help you to reduce your interest cost, especially if you take out a 0% APR credit card or low-interest rate balance transfer credit card.
- Credit cards that can help you rebuild your credit history – such as secured credit cards
- Rewards credit cards – offer different types of rewards, some of which can be: cash back, rewards in points, and/or travel rewards.
Deciding on the correct type of credit card for your needs can provide several benefits in the future, namely, if you use your credit card to make purchases on a regular basis, then a cashback credit card might be beneficial. On the other hand, if you decide to apply for a travel credit card, then when you are making a purchase, it won’t do you much good.
Know your credit score
Knowing your credit score is important because you are able to find out the credit card promotions you are eligible for. Don’t forget that a higher credit score means better perks and credit card terms in general. Do you know why a high credit score is preferred? In case your credit score is lower than what you may have expected, try to go through the hassle and improve your score.
Paying off the entire balance when due or not
The ability, as well as the habit, to pay off your outstanding balance in full each month is also an important factor to consider. Namely, think for a moment, do you usually pay off the entire credit card balance each month or not? Maybe you are using your credit card for pricey purchases and repaying the balance through a couple of billing cycles. In such a case, the APR on your credit card is highly important. Namely, if you plan to gradually pay off the outstanding balance, then rewards credit cards might not be an adequate choice (usually, these credit cards have higher APR).
Analyze your spending habits
It is important that you know your spending habits when it comes to a credit card. If you see that you are making most of your purchases at the same place, see if there is an offer for a co-branded credit card.
Apply for your credit card
This step is rather straightforward. You go to the bank of your choice and follow the application procedure. But, before applying, make sure that you have selected a credit card that offers the best value for you. For this reason, carefully consider the characteristics of the available credit cards. Remember, credit cards are one of the most expensive forms of debt.
Although most of us don’t like credit card debt, having a credit card in your wallet can be beneficial. The benefits, though, will come only if we make a clever selection of credit cards and we manage the credit card debt wisely.
Before choosing the best credit card, always make sure that you know how you will use your credit card. In addition, be familiar with the fees, interest rate, billing cycle, and other characteristics of the credit card you want to apply for.
Don’t get into a situation where you end up with a high level of expensive debt simply because you have chosen the wrong credit card.