There are so many credit cards on the market that
it may seem like work figuring out which one is best for you. You’ll be happy
to know, however, that no matter how great your financial record of credit
score may be, there is a credit card for you. You just need to know how to pick
the right card for your current situation.
Furthermore, you also need to know the purpose of getting a credit card. Is
this your third or fourth card that is only meant to be used in emergencies? Is
this your first credit card that is meant to build credit? Are you looking
for a working capital credit card so that you can improve the cash flow of
your business or your personal life? Depending on your needs, you will
pick a different kind of card.
Although the process of picking the
right credit card will differ for everyone, there are some tried-and-true steps
that everyone can take. Here are a few steps to make sure that you consider all of the major pitfalls when choosing the
right credit card or cards for you.
Considering Your Current Credit
All credit card issuers will use your FICA credit score as a major factor when determining if you will be offered a card. They will also use it to determine the features that you will be offered as well. In many cases, having a low credit score will not preclude you from getting a credit card. You just may not get the advantages that your friend with a higher credit score may get.
Once you know what your current credit score is, you can begin comparing apples to apples. After all, it makes no sense to look at credit card plans that are meant for people with credit scores that are outside of your range. This is how many credit card companies actually sell improper credit cards to low credit buyers. Those buyers actually do not consider the offers that are made for their credit tier, and they look at the offers for people with a credit score of 750 and above. This is the easiest way to get involved in a credit card agreement that you will not enjoy.
You need to make sure that you are looking at the credit card that you actually want before you apply. Every credit card application involves a hard inquiry, which means that your credit score will go down when it is checked. You don’t want this to happen very often.
If you are going for a card that you actually think you can get, then the hard inquiry is worth it. You should also make sure that the features on the card are worth the hard inquiry. There are no guarantees when it comes to acceptance, and the best way to get the credit card that you want is to start off with the credit card that you can get.
Secured vs. Unsecured Credit Cards
One of the most important distinctions that you will make is whether to get a
secured or unsecured credit card. A secured credit card does not help to build
your credit as fast as an unsecured credit card. However, it is definitely a
good choice for people with a low credit score, as it may be the only credit
card that you can actually get.
If you get a secured credit card, then you should be sure that it is used
responsibly. You should also make sure that the issuer of the car reports to
one of the three major credit bureaus. Not all secured credit cards do this
automatically, so be sure that you have everything that you need in the
agreement before you finalize signing on the dotted line.
Carrying a Balance vs. Paying Off Credit Every Month
How are your personal finances? This is a question
that you definitely need to answer before getting a new credit card. Your
personal finances will determine whether you carry a balance or you plan to pay
off your balance every month. The way that you handle this will make a big
difference in the money that you will pay to the credit company and the way
that you use a credit card overall.
You may be able to take advantage of certain features if you pay off your
balance every month. However, having the additional financial freedom of
carrying a balance may be more important to you. Figure out what you want
before you get a card just because it has the best features.
If you plan to carry a balance, then your number one priority should be a credit card with a low APR (annual percentage rate). If you are paying off your card balance every month, then this does not really matter to you. You may be able to take a card with a higher interest rate if it has more features that are of interest to you.
Transferring a Balance
The balance transfer offers that many credit cards
market may have no relevance to you. However, if you know that you are
getting a new credit card in order to transfer balance, then you should take a
close look at what that card is offering.
What rate you currently paying? Does a
new card have an introductory offer that you can take advantage of? More
importantly, what will the rate be after that introductory period expires?
There is also a fixed fee at the front end of every balance transfer. Make sure
that you know exactly what this is so that you have the “down payment” to make the financial move that you
need to make.
Your Rewards
Now we get to the fun part of owning a credit card – the rewards. If you have a good credit score
and you don’t necessarily need to build your credit was secured card, then you
have an opportunity to focus on the rewards programs that are offered by many
companies. Keep in mind that these cards usually require you to have excellent
credit, so you should take a look at your credit score before applying here.
The cash back reward is one of the most commonly chosen. If you don’t travel a
lot or purchase big-ticket items at an expensive retail outlet, then you
may prefer just receiving cash back. However, certain credit cards may actually
give you better rewards if you choose retail discounts or travel miles. Make
sure that you take a close look at the companies that your credit card
issuer is affiliated with.
Susan McCullah is an established writer who has created dozens of informative articles about credit scoring, identity theft, budgeting, taxes, debt, and finance. She has worked in the Credit Reporting industry for 15+ years and is FCRA certified. Susan regularly conducts in-person presentations and webinars on the topics of credit scoring formulation, raising credit scores, and identity theft.
