Credit cards have a bad name in the personal finance world, you’ll find many bloggers shredding their credit cards and have negative things to say about credit cards. Often it is not the credit card that is the problem, but rather the person is being irresponsible in using them. Credit cards are just a tool and if used responsibly they can be a big part of your finances. I am not going to get into how to use a credit card or credit card management, those are topics I’ll discuss another time, for now let’s look at how you can choose the best credit card for your situation.
1. Understand Your Needs
Before you start researching cards, find out what you need. Do you want to have a low interest, rewards or do you prefer cash back? Every card will be different, those with rewards or cash back usually have a higher interest rate, on the other hand low interest credit cards do not offer any rewards or cash back. There is also the issue of an annual fee to consider, many Gold and Platinum cards have an annual fee attached to them along with many rewards, are you willing to pay annual fees?
2. Low Rate vs. Rewards vs. Cash Back
I am sure you want a low rate credit card that offers some rewards and cash back with no annual fee. Unfortunately that does not exist (if you find it please let me know), you have to pick between a low interest credit card, rewards credit card or a cash back credit card. How to choose one that fits you? Well will you be carrying a balance on the card? If you do than low interest credit card is a better option for you or maybe you should consider a personal line of credit instead. If you do not carry a monthly balance on your credit card then a rewards or cash back card might be better for you. I personally prefer a cash back card to a rewards card; I can take the cash back and use it for anything else I want with no restrictions.
3. Check Your Credit Report
Before you start applying for credit cards, I recommend you check your credit report and credit score. You can get a free credit report here. Knowing your credit score will help you narrow down the cards you may qualify for. If you do not have a great credit score you will not be able to get the best deals or a low interest card, do not waste your time or hurt your credit by applying for cards you know you will not qualify for.
By now you should know your needs and you know your credit score so it’s time to do some research. You can simply start by visiting the major banks websites and pulling up the credit cards that fit your needs, ones you have the list compare them against each other. If looking for low rate credit card, list them in order of lowest to highest card then start comparing them on other metrics (such as Grace period, balance transfer etc.) If you are looking for cash back credit card rank them in order of highest cash back then start comparing interest rates, rewards, potential annual fees etc. Eliminate cards that are inferior when compared to the others and select the best option available.
5. Be responsible
Now that you have found the right credit card for you ensure you use the credit card responsibly. Do not apply for a larger amount than you can afford to pay, do not use more than 35% of your limit, pay a few days before due date to ensure they receive it on time. Keep track of your records and check your statement every month to ensure accuracy.
What type of credit card do you have? Do you mind paying annual fee for credit cards?