There are literally thousands of varieties to consider when looking to sign up for a credit card. Because there is no single credit card that is “better” than all the others that exist out there it’s good to know the different types of cards and what value they offer. By knowing the credit card application process and being able to ask yourself some key questions you can choose the best credit card for your needs.
Let’s look at the whole process here.
1. Check Your Credit Score
Before you go out and start applying for credit cards it’s important to know what your credit score actually is. The higher your credit score the more offers you’ll be able to consider and the more likely you’ll be able to get approved (not to mention with better benefits than other cards). Here are some ways to check your credit report and score:
Through the 3 major federal credit bureaus: Experian, Equifax, TransUnion (you are allowed 1 free per year from each of these) through the website:
- AnnualCreditReport.com
- Many banks offer you the ability to check your credit scores
- Private companies online will offer free credit score, many of them for free
If your score is lower than you thought it would be, it’s a good idea to see a detailed credit report which will show you what is causing the lower credit score. You can also check if there are any errors that can hurt your score and dispute them on your report if need be.
2. Determine the Type of Card for Your Needs
For the most part there are 3 major card varieties to consider.
- Cards with low-interest rates
- Cards with rewards like travel miles or cashback
- Cards that help you build credit, like a secure credit card
Every person will have different financial needs and goals. So the best card for you should be one that reflects your individual needs. If traveling is not something you do much than a card with travel miles as a reward would not make sense.
Cards With Low Rates
Many cards offer 0% APR financing for an introductory rate and which after a year goes to a low rate (or some other time frame). This will typically only be available for individuals with above-average to excellent credit scores.
Cards With Rewards
Rewards cards are great for many people because of the variety of rewards offered. If you travel a lot than a card focused on travel which builds travel miles and has no foreign transaction fees could be a great fit. Or if you use your card for family purchases like groceries a card that offers cash back could be the right fit. So look at rewards in how they relate to your lifestyle. Someone who doesn’t travel shouldn’t use a travel card.
Cards To Build Credit
Secured or Student credit cards are great tools for those with poor or no credit (a credit “ghost) in order to build their credit. Secure cards typically require a minimum deposit of $200 which you pay to the bank when getting the card. You get that money back when the account is cleared or closed with no debts. These cards are great for building credit. Think of it this way, you pay your phone bill of $90 on auto-pay every month using a secure card and pay it off each month. This is a great way to build your credit.
3. Ask Questions Narrow Your Choice
Using different websites credit card comparison tools you can easily look at the advantages of multiple different card types all at once. Here are some questions you should be asking for each major card variety.
Cards With Low Rates
How long do I get 0% APR? After that time what is the new APR rate? If you’re planning to pay off some debt this way make sure the card has a long enough time period for you to do so. If you plan to pay the debt off in 9 months but the 0% only lasts for 6 months you should look elsewhere.
Are there any rewards? Just because a card offers low rates doesn’t mean it won’t also have some rewards to offer. To find out if a card you’re considering also has some added benefits beyond the low rates on financing.
Is this card good for a balance transfer? Even with a 0% APR purchasing rate the balance transfer rate could be higher so you should check into that rate as they are usually independent.
Cards With Rewards
How will I use the card? What will my purchasing pattern be? Different cards have different rewards for different types of purchases. So if you mainly will use your card for fuel purchases you should look for a card that has fuel rewards. Eat out a lot? Dining rewards should be something to look for. So on and so forth. There are many different rewards for types of purchases and the card you choose should fit in your lifestyle.
How fast do rewards come in and when can I use them? You should find this out because different cards have different time periods and thresholds to receive rewards. Be sure to find out so you’re not expecting rewards to show up in a month when it takes 6 months for example.
Is the card and the rewards complicated? We’ve all heard stories of blacked-out airline seats where your travel rewards points are no good. There are other restrictions for different rewards as well so if this is something you don’t want to deal with it’s a better idea to just go for a cashback rewards card, they are far more straightforward. Get cashback on your purchases.
4. Apply When You’ve Found the Card With The Best Value for You
When you’ve narrowed down the field of the seemingly endless credit card offers to a handful it’s time to really scrutinize them carefully in terms of comparison. If through following these steps above you’ve found a clear winner then that would be the card to go for. Little differences can add up over time and it may be that time scale which tips the scale in the direction of a single card for you. Find out how long for limits to be upgraded on each card and also when you can use rewards if there are any.
Finding the right credit card for you doesn’t have to keep you up at night. Go through these simple steps, take notes, determine your credit score, and choose the right card for you! You’ll be happy you started the credit journey from here as if done right the sky is the limit.
