Credit cards can be great financial tools. However, as with all things financial, if you want your decisions to be successful, you need to do what’s best for you. When choosing a credit card, you want one that offers you the best combination of perks for your individual financial situation.
The right credit card can help you find financial freedom — as long as you pay off the balance each month and follow good spending habits. Your credit card should match your spending plan and priorities, and help you reach your long-term financial goals.
What Do You Want the Credit Card For?
Your first issue should be to figure out what you want the credit card for. You should consider the reasons you are getting the credit card. Some reasons to open a credit card account include:
- Build your credit history
- Consolidate debt and pay it down quicker
- Earn rewards to redeem for free travel, merchandise and even cash back
- Emergency access to funds
More on Credit Cards
Consider the reasons behind opening a credit card account. This will give you your first idea of what might work best for you. For someone trying to rebuild his or her credit, a secured credit card might be the only option at first. If you are looking to consolidate debt so that you can pay off your credit cards as quickly as possible, a card offering a 0% balance transfer deal might be preferable, even if there isn’t a rewards program. Think about why you plan to use the card, and choose one that will best help you reach your goals.
Other Things to Consider
Of course, once you have a general idea of how your credit card will be used, it’s time to consider secondary factors. Do your research, and find out what might work best for your situation, and what will help you maximize your money. Things to keep in mind:
- Rewards that you will use: If you want to make use of a rewards program, it’s important to make sure that you will actually use the rewards. This means that you need to think about what your priorities are. Do you prefer travel rewards? Get a card that offers generous points and easy-to-redeem opportunities for airfare and hotel states. If you just want the cash, consider cards with generous programs, including those with rotating categories that earn more, depending on what you buy.
- Interest rate: Those who pay off their credit cards each month don’t have to be as concerned about a high interest rate. However, if you get a credit card in the hopes of financing large purchases for three or four months, or if you regularly carry a balance, a lower interest rate becomes more important. Consider your habits as you choose a credit card.
- Intro period: If you are transferring a relatively low balance to a new credit card, a short introductory period might not be a big deal — especially if you like the rewards program the card has. However, if you have a bigger balance, pay attention to the intro period; you’ll need a longer period in order to get the most benefit out of the interest savings. In some cases, it might be worth it to transfer to a card with 2.99% rate for the life of the balance, rather than to get a card that will stick you with a 19.99% interest rate after nine months.
- Other perks: Find out what other useful features the credit card might have. Some users like concierge services. Others like cards that offer flexible rewards programs. If you shop at a certain store, an associated card can provide you with extra perks that you will use. Find out about the ability to set your own due date, occasionally skip a payment, or receive some other benefit. Sometimes, these “fringe” benefits can make a bigger difference than you might think.
No matter what credit card you apply for, you want it to fit your style, and your spending priorities. Take some time to think about what is most important in a credit card, and how a credit card can be used as a tool to help you reach your financial goals. Then apply for whatever card best fits your needs.
Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.