- 29 July, 2020
- 8768793
How to Pick the Best Credit Card for You: 4 Easy Steps
How to Pick the Best Credit Card for You: 4 Easy Steps
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our own. STEPS
Finding the
best credit card is part art, part science.
No single
credit card is better than all others in all categories — or for all people.
But by understanding your options and asking the right questions, you can find
the card that's the best fit for your spending habits and credit situation.
1. Check your credit
Find out
what credit card offers you might be eligible for by checking your credit
score. The better your score, the greater your chance of being approved for
cards with better perks. Among ways to check your score:
• NerdWallet offers free access to
credit scores.
• Many credit card issuers give
cardholders free FICO scores.
• The three major credit bureaus
(Experian, Equifax and TransUnion) sell credit scores.
If the
number isn’t what you expected, check your credit reports to see what's causing
the problem. You can then start figuring out ways to improve it, from changing
your spending habits to disputing an error on your reports, if you need to.
Federal law entitles you to one free copy of your credit report from each of
the three major bureaus every 12 months. Get your free reports at
AnnualCreditReport.com, a federally authorized site.
2. Identify which type of credit card
you need
There are
three general types of credit cards:
1. Cards that help you improve your credit
when it's limited or damaged.
2. Cards that save you money on interest.
3. Cards that earn rewards.
The best
card for you is one with features designed to meet your specific needs. If you
don't travel much, for example, then the best travel card in the world isn't
going to do you a lot of good. If you want to build or rebuild credit: Student
or secured credit card Student credit cards, unsecured cards meant for college
students who are new to credit, are easier to qualify for than other types of
credit cards. So are secured credit cards, which generally require a security
deposit of $200 or more. Your deposit is returned to you when the account is
upgraded or closed in good standing.
If you want
to save on interest: Low-interest, 0% APR or balance transfer card. A card with
an introductory 0% APR and ongoing low interest could be a good match for you
if you plan to use your credit card in case of emergencies, or if you have an
irregular income and carry a balance from time to time. A balance transfer
offer could help you pay off a high-interest debt interest-free. Keep in mind
that these offers may be harder to find if you have average or poor credit. If
you want to earn rewards: Rewards, travel or cash back
A rewards
credit card is a good match for you if you pay off your balance in full every
month and never incur interest. These cards typically have higher APRs, but
offer larger sign-up bonuses and give you points, miles or cash back on every
dollar you spend.
3. Narrow your choices by asking the
right questions
Visit
NerdWallet’s credit card comparison tool and search for the type of credit card
you're looking for, filtering results according to your credit score and
monthly spending. As you go through the top picks, consider these questions.
For student
and secured credit cards:
• Will this card help me build my
credit? Look for a card that reports your credit card payments to the three
major credit bureaus. Many secured cards don't do this.
• How much does it cost to open an
account, including the annual fee? The rewards on these cards generally aren’t
high enough to warrant an annual fee. Unless you have very poor credit, you can
likely avoid this expense. For secured cards, the lower the security deposit,
the better, although your credit limit may be tied directly to how much of a
deposit you make.
• Can I graduate to a better card later
on? Choose a card that will let you build your credit and upgrade to a card
with more competitive terms. This makes it easier to leave your card open
longer, boosting your average age of accounts in the long run.
For
low-interest, 0% APR or balance transfer cards:
• How long is the 0% APR period, and
what is the ongoing interest APR? Look for a card that gives you enough time to
pay off your debt interest-free. If you’re planning on carrying balances over
several years, consider a credit card with a low ongoing APR.
• What is the card’s balance transfer
policy? If you’re doing a balance transfer, look up a card’s balance transfer
fees. Find out what types of debt you can transfer and whether there’s a limit
to how much you can move over. Note that the balance transfer APR on a card may
be different from the purchase APR.
• Does the card offer rewards? If you’re
looking for only a few months of 0% APR — perhaps instead of a sign-up bonus —
you may be able to find a card that doles out generous ongoing rewards as well.
For rewards,
travel or cash-back cards:
• How do I spend my money? Look for a
card that delivers the highest rewards for the categories you spend the most
on. If you’re a big spender, consider getting a card with an annual fee, if
your rewards earnings would offset the cost. If you’re planning to use the card
abroad, look for one with no foreign transaction fees and chip-and-PIN
capability, rather than the chip-and-signature technology that’s standard in
the U.S. This goes for other types of cards too.
• How complicated is this credit card?
If you don’t want to contend with limited award seat availability, spending
caps, rotating bonus rewards and loyalty tiers, consider a card with flat-rate
cash-back rewards.
• How quickly will I earn rewards, and
how much are they worth? Read NerdWallet’s rewards valuations to find the
answers to these questions.
4. Apply for the card that offers you
the highest overall value
Narrowing
your choices is the easy part, but deciding between two or three similar cards
can be quite difficult. If you've already found a clear winner after Step 3, go
with that one. If not, it’s time for a tiebreaker round.
Look closely
for differences. All other values being equal, here are some factors that might
set a card apart:
For student
and secured cards:
• Credit limit automatically increases.
Certain cards let you increase your limit after a few consecutive on-time
payments.
• Interest paid on your deposit. Some
secured cards place your security deposit in an interest-earning CD. This way,
you can earn a small amount of money on it.
For
low-interest, 0% APR or balance transfer cards:
• Debt payoff planner. Some issuers let
you create your own debt payoff plan on an online portal, a valuable tool if
you're overwhelmed with debt.
• No late fees or penalty APR. Certain
cards waive these charges. If you fall behind on payments, this could come in
handy.
For rewards,
travel or cash-back cards:
• Lower required spending. The less you
need to spend to qualify for a sign-up bonus, the better.
• No expiration date on rewards. On some
cards, you can use your rewards as long as you keep the card open.
When you
finally pick a card, keep in mind that, on the application, you can include all
income you have reasonable access to, not just your personal income. For
students, that can include money from grants and scholarships, or allowances
from parents. For others, it may include a partner or spouse's income.
So you’ve
found the best credit card. What’s next?
Choosing the
best credit card is an important decision, but don’t stop there. Use your card
the right way to get the most for your money. If you’re trying to establish
credit, pay your bill in full every month and don’t use too much of your
available credit. Stick to your debt payoff plan if you snagged a 0% APR deal.
And if you’re trying to rack up rewards, use your card for everyday purchases
and pay your bill in full every month.
The credit card you choose should help you achieve your financial goals in the most affordable, efficient way possible, whether you’re trying to build credit, borrow money or earn rewards. Don’t settle for less.