How To Choose a Credit Card: It’s Not As Complicated as You Might Think

How To Choose the Best Credit Card for You

1. Check Your Credit Score and Credit Reports

Get Your Score From Each Major Credit Bureau

Knowing your credit score and the range it falls into is important as most credit cards have a credit score requirement for approval. The two main credit scoring models are FICO Score and VantageScore, and you can check yours for free in a variety of ways. First, if you already own a credit card, check within your online account to see if your issuer offers a free credit score check. Otherwise, you can check your VantageScore for free through American Express® MyCredit (regardless of if you’re an Amex customer) or get a free FICO Score through myFICO.

Check Your Credit Reports for Errors

Each of the three major credit bureaus—Transunion, Equifax and Experian—have their own credit report of your financial history. These reports include information such as the amount you’ve borrowed, your payment history and the age of your accounts. You can get a free copy of your credit report from each of the three bureaus once a week through AnnualCreditReport.com.

Keep an eye out for any errors too, and if you find any, make sure to dispute them.

If Needed, Dispute Errors 

The Consumer Financial Protection Bureau (CFPB) provides links and detailed instructions about how to dispute inaccuracies. If you find any, do this as soon as possible, as these errors are most likely bringing down your credit score.

2. Determine What Type of Credit Card You Want

Are you looking for rewards such as travel points or cash back? Is your plan to use the card solely for business expenses? Are you a student looking to build credit for the first time? There are all kinds of credit cards on the market, so it helps to have a good understanding of what’s available in order to choose the best fit for you.

Rewards Credit Cards

Any credit card that offers rewards on your purchases is considered a rewards credit card. You can earn points, miles or cash back, and these rewards can be earned at a flat rate or through purchases in select bonus categories, like gas stations or grocery stores. 

Further, bonus categories can be fixed, meaning they stay the same throughout the year, or rotate on a monthly or quarterly basis. Some bonus category rewards cards automatically reward you on your top spending category or let you choose the category you earn rewards in from a predetermined list.

Cash Back Credit Cards

Simply enough, cash back cards are rewards cards that earn cash back. Many people like cash back cards due to their simplicity, and these cards can be best for those looking to redeem their rewards for a statement credit or direct deposit. 

Travel Credit Cards

If you’re frequently en route from point A to point B, a travel rewards card can earn you points or miles on your purchases. Travel card rewards structures tend to be focused on travel purchases, like airfare or hotel stays. They can also be co-branded with a particular airline or hotel brand, through which you earn rewards on brand-specific purchases and other perks.

Frequent travelers who’re interested in maximizing their rewards value toward future trips do well with travel cards, as many offer heightened rewards when redeeming for travel through the issuer’s travel portal or when transferring to an issuer’s airline or hotel travel partners. 

0% Intro APR Credit Cards

Zero-interest credit cards come with a 0% introductory APR for a limited time, after which you’re charged a variable interest rate. These cards offer intro APRs on purchases, balance transfers or both and are ideal for those looking to pay off a large, upcoming purchase or who have existing credit card debt to pay off.

Balance Transfer Credit Cards

Balance transfer credit cards let you transfer over credit card debt from other cards. These cards typically offer lower interest or 0% APRs for a limited time, making the debt repayment process less costly. The best balance transfer credit cards offer intro APRs for up to 21 months.

Business Credit Cards

If you own a small business or are simply looking to keep your personal and business expenses separate while earning rewards or other perks, a business credit card may be just what you need. And if you have a small business, many business cards let you request additional employee cards for free. To qualify, you need to own a business or be able to show you are making regular income through a particular activity.

Secured Credit Cards

A secured credit card is intended for borrowers with limited or damaged credit profiles. If you’ve missed a few credit card payments in the past, a secured credit card can help you rebuild your credit score. The drawback is that your credit limit is based on your initial cash deposit. Plus, after a series of on-time payments, some issuers let cardholders transition to a standard, unsecured credit card.

Store Credit Cards

Store cards are partnered with specific retailers and offer rewards on purchases with the retailer. While some store cards can be worthwhile, many aren’t thanks to high APRs and hyper-specific rewards categories.

Student Credit Cards

Student credit cards are best for college students with limited credit histories and are often easier to qualify for; some student cards don’t even require a credit score to apply. The best student cards will have no annual fee and offer rewards on your purchases.

3. Take Credit Card Fees Into Account

There are a variety of fees that can come with a credit card. As you compare your options, be sure to take into account the following fees and compare the cost versus a card’s overall value.

• Annual fee: Not every credit card charges an annual fee, but the ones that do typically offer higher rewards rates and better perks. Annual fees can be anywhere from under $100 to over $600, so make sure you can afford the yearly cost or plan to take advantage of the benefits that help outweigh it. 
• Balance transfer fee: Most balance transfer cards charge balance transfer fees. The amount varies, but it’s often 3 to 5% of the amount transferred. Take this fee into account if you’re planning to pay off debt with a credit card. 
• Foreign transaction fee: Foreign transaction fees are charged when you make a purchase outside of the United State—for example, on vacation or while studying abroad. The best travel credit cards don’t charge foreign transaction fees, but cards for cards that do, you’ll typically pay about 3%. 
• Late payment fee: If you fail to pay the minimum balance on your credit card bill’s due date, some issuers will charge you a late payment fee. Amounts vary, but they can range up to around $40.

4. Compare Interest Rates

Credit cards feature variable APR ranges, which is the interest rate you’ll be charged if you carry a balance. Your APR is determined in part by your credit score, so the better your score, the lower your APR is likely to be. The APR you’re assigned won’t matter unless you plan to or end up carrying a balance, so take this aspect into consideration if you anticipate doing so.

Further, some credit cards will feature a 0% intro APR on purchases or balance transfers for a limited time, which may sway your decision if you have credit card debt to pay off or need a zero-interest period to cover your purchases.

5. If You’re Interested in Rewards, Compare Rewards Structures

As highlighted in earlier sections, credit cards can feature different types of rewards structure, like flat rate rewards versus bonus category rewards. If you’d prefer to swipe and earn the same account of rewards no matter the purchase, you’ll do better with a flat-rate rewards card. But if you’re interested in earning rewards in specific categories that you spend heavily in, a bonus category card will better suit you.

Also keep in mind some rewards cards place spending caps on the amount of rewards you can earn in specific categories, after which you’ll typically earn 1X points/miles or 1% cash back. 

What Do I Do After I Choose a Credit Card?

Once you’ve chosen a credit card, the only thing left to do is to apply either online, over the phone, in person or by mail (applying online is easiest). You’ll need to provide some personal information, such as your Social Security number, date of birth and address. You may even need to supply certain documents that verify your financial situation. 

Approval can take anywhere from a few minutes to a few weeks, depending on how you applied, and online applications tend to be approved the quickest. Thanks to the Equal Credit Opportunity Act, issuers need to respond to your application within 30 days.