If you're shopping for a credit card, you've probably noticed there are plenty of options on the market today. Low-interest, balance transfer, rewards, cash back, airline- and hotel-specific cards, retail cards, student cards, business cards … the list is endless. So how do you find the credit card that's right for you?
Your Credit Score Matters
Your credit score determines what cards you may qualify for as well as interest rates. Keep it healthy by paying your bills on time, not maxing out your credit lines, or applying too often for new credit. Late payments and carrying a high balance are two of the quickest ways to drop your score. If you don’t know where you stand credit-wise, annualcreditreport.com provides a free copy of your credit report every 12 months from each credit reporting company. However, keep in mind that credit scores aren’t included with the free reports; you must purchase them separately.
Challenged or No Credit
If you have a low score, or a thin credit history, you’ll have to seek out options that can help you build or rebuild your credit profile. You may qualify for either a secured or unsecured card. With a secured card, you put up a cash deposit you borrow against. By making modest charges and paying the balance off each month, you’ll build a credit history which will be reported to the credit bureaus. In time, you’ll see your score rise. If you’re a college student, you may qualify for a student credit card.
Carrying a Balance
If you have a balance on your card, it’s important to find one with a low interest rate. This’ll help you pay less to pay off your debt. Your local credit union may offer the most competitive interest rates.
Balance Transfers
If you have a game plan to pay off credit card debt and keep it paid off, then you may want to consider a balance transfer card, which allows you to transfer a card's balance with a higher interest rate to one with a low- or no interest rate. Keep in mind that balance transfer offers are usually for a set period of time, so you'll need to factor in whether or not you can reach your goal in the time period offered. And — when that time ends, make sure the card's new interest rate is competitive and not higher than it should be. Avoid cards with balance transfer fees, which typically hover around 3%.
Rewards, Cash Back and More
Diligent about paying off your card each month? Then, you probably don't need to worry as much about interest rates and can shop around for cards that fit your lifestyle. For instance, if you travel a lot, a card that offers travel rewards and no foreign transaction fees can really make a difference in your bottom line. Do your homework on research sites such as Bankrate.com, NerdWallet.com, and Credit.com. Be careful with store retail cards, which may come with plenty of perks, but interest rates tend to be higher, so you'll need to use them with care.