The choices for credit cards are endless and advertisements are everywhere you look. Mailers, robocalls…you cannot hide. Not every credit card is going to be a right fit for you, even though the offers sound too good to pass up. There are some that you won’t qualify for due to your credit score and history, and others that you wished you never signed up for.
How do you know you’re choosing the right credit card?
You should be asking yourself these questions to narrow down the options available to you and to make smart decisions.
- What type of credit card should you get?
- Is there an annual fee?
- What is the spending limit?
- What is the interest rate?
- Are there rewards?
- Why are you getting this credit card?
- Are you financially responsible enough to have a credit card?
- How do you plan on using your new credit card?
If these questions sound a bit foreign, have no fear. I’m your alibi who will simplify and clarify it all. Yes, I’m a poet and yes, I know it.
Check Your Credit Score
A healthier credit card provides more credit card options. Why? If your credit history screams, “I never pay on time, never pay in full, and probably should not have this credit card in my possession even though I enjoy spending money on it,” then other credit card companies will keep their distance.
If your credit history screams, “I pride myself on paying in full every month because I never spend more than I can afford,” credit card companies will flock to you and offer you better interest rates and lower finance charges.
Creditscore.com says, “A score of 700 or higher will allow you to get a rewards card with a sign-up bonus or a promotional interest rate (and a relatively low regular APR).
Find the Right Type of Credit Card
There are several types of credit cards, so figuring out what you need to get out of a card, will help you narrow down your choices. The idea is to help you become more accountable and organized with your finances, not to accrue charges you can’t pay and create additional headaches.
Rewards credit cards
Every time you use this type of credit card, the credit card company rewards you with either points, cashback, discounts with partners like hotels or restaurants, or mileage. It’s always nice to get something in return for spending money.
The more you use your card, the more you earn, which is wonderful, but very dangerous. Don’t let those exciting perks negatively drive your spending.
Cards to establish or increase credit
A secured credit card is a great way to establish credit history and is “backed by a cash deposit, which serves as collateral should you default on payments,” says Investopedia.com.
If you’re a student, you’re in luck. The rates and fees are more attractive than regular credit cards and when used responsibly, can help build a good credit history. Notice the highlighted word in the previous sentence.
With these cards, you’re forced to pay off your bill in full every month. If you can’t commit to that, this card is not for you, but it’s a goal you should put on your to-do list. If you can, it’s a great way to build up that credit score and get in the habit of spending only what you can afford.
0% APR Credit Cards
This is helpful if you have a large purchase because as an introductory perk, you don’t have to worry about paying interest for a set period of time. These cards are particularly helpful for paying off a large debt as well.
In an article by CNBC.com, we learn that “These cards can help you consolidate credit card debt by transferring balances to a balance transfer credit card without incurring interest.” Sounds great right? You always have to read the fine print to protect yourself. For example, some 0% APR credit cards have exclusions, the amount of interest-free time may vary by transaction, and there could be hidden fees.
If you want to get the best deal on a car, you most likely shop around and compare prices, right? The same goes for credit cards. There are so many available, it’s important to spend the time discovering what’s going to be the most beneficial for you and your financial needs. There are valuable tools available to you online for thoroughly shopping and comparing credit cards. Ask questions, gain knowledge, and take your time.
It all comes down to your specific financial requirements and what you’re trying to accomplish with these credit cards. If they’re used properly, you’ll be able to build a healthy credit history and a credit score that you can be proud of. Future purchases like a house or a car will be more attainable and a less stressful process.
Do your homework before you agree to any credit card. Each and every move you make financially will create a trail and as you know, that means the good and the bad. You may be tempted by impressive advertising and promises, but because you know what to look for now, you can make smart choices for your financial future.
If your goal is to get out of debt and you can successfully do that with credit cards, fantastic. There’s something very freeing about getting out of debt on your own. It’s a sign of better times, maturity, lessons learned, and accomplishments.
As you learn more about financial opportunities in your future and your confidence builds, nothing will get in your way of success. You will soon learn to treat every dollar as an investment to build a brighter future for yourself.
Hope You Enjoyed the Read!
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