There are many credit card offers available to us. They come in the mail, reach out to us in advertising, and are on display at airport and store counters. We know people who have found the best credit card ever and think we should have it too.
If you come across a credit card offer that seems really great, or you are actively looking for a new card, you will want to make your choice carefully.
The trick is to find a credit card that best suits your payment and spending habits.
Here are five things to consider:
1. Interest Rates
If you carry a balance on your card, you pay for borrowing that money. This interest can add up to a significant amount of money depending on the amount of your balance, how many months you carry the loan, and your interest rate. You want to look for a card with a low rate.
Some credit card offers give a grace period of several months with no interest when you transfer a balance. Pay attention to the length of the grace period and the anticipated interest rate once the grace period ends.
If you pay off your balance in full each month, the interest rate is less of a concern.
2. Annual fees
Some annual credit card fees are pretty hefty. If you are considering a card with such a fee, analyze whether the card’s benefits will at least cover the fee. If, for example, the annual fee is $250, will you make enough use of the perks or spend enough on qualifying purchases to earn more in rewards than the annual fee? There are plenty of cards with no annual fees that offer decent rewards.
Reward cards benefit people who pay off their credit card balance in full each month. If you carry a balance, the amount you pay in interest could be more than the rewards.
There are many types of reward cards. Look for one that matches your spending. Do you use your credit card frequently for travel and restaurants? Or, do you spend primarily on gas or groceries? Consider the complexity of the rewards program. Do you need to navigate a confusing point system to claim your rewards?
4. Cash Back
Cash back credit cards without complicated point systems are often the simplest to understand. These cards give you back a percentage of what you spend with the card. Some cash back cards credit the amount you earn to your statement, reducing your payment. Others send it to your bank account for you to spend. Some give you a choice. As with reward cards, these cards benefit consumers who pay their balance in full each month.
Credit cards tied to a brand, such as an airline, hotel chain or retailer, work best for people loyal to that brand. If you typically search for the best deal, a credit card tied to a brand is probably not a good choice. You may not spend enough to qualify for the rewards.
With so many credit card programs available, I recommend you determine what is most important to you. Then look for cards with that feature at the lowest interest rate possible.
This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice. Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.