Among several credit cards available, selecting the best credit card for you is a herculean task that requires some tips. Besides, there are reward credit cards to get anyone confused – some people go with what is recommended by friends while others just go with what they see online.
Types Of Credit Cards
There are several types of credit card, these are;
Standard credit cards: Offers no rewards
Balance transfer credit cards: Offers a low introductory rate when the balance is transferred
Reward credit cards: Offers rewards for making use of credit cards for purchases
Student credit cards: Designed for college students. Comes with rewards and low-interest rate when the balance is transferred
Charge cards: Does not come with a preset spending limit
Secured credit cards: Requires a security deposit and designed for people without credit history or who have destroyed their credit score history
Subprime credit cards: For people with bad credit score history. It comes with high fees and interest rate
Prepaid cards: Similar to a debit card – but can’t be used to check balance. The card does not help to build your credit score history
Limited purpose cards: Designed for use at designated locations
Business credit cards: Specially designed for business use. It helps business owners to separately keep track of both business and personal transactions. It still requires you to have a good credit history before you can apply for it
How to select the best credit card, step-by-step guide
The following are the easy steps to select the best credit card for you;
What is your credit score?
Several of the credit cards available in the marketplace require you to have a good credit score. Besides, people with fair credit scores still have a chance of picking up a credit card – even with people with no credit score or those that have a poor credit score.
However, knowing your credit score will help to know the type of card to apply for.
The following are the rules of thumb:
- 579 or lower: Poor
- 580 – 669: Fair
- 670 – 739: Good
- 740 – 799: Very good
- 800 and above: Excellent
So, there is a need to work on your credit score if it doesn’t look good before applying for a credit card – one of the ways of doing this is by practicing early payment of bills.
Also, apply to companies with decent approval odds depending on your credit profile. Besides, you can check online for prequalified card offers that match your credit profile – this gives some level of assurance that your application will be approved or not.
Also see: Credit card quiz
What type of credit card do you need?
So, your credit score will give you a better picture of the type of card needed at a given time. Therefore, the best credit card for you will either fall into any of the categories below;
Those cards will facilitate the improvement of your credit score when damaged
Those cards that offer rewards, and
Those cards that give some bucks on interest
So, here is the kicker – if you need to improve your credit score, get a credit card that helps build your credit. That is an early payment of debts and keeping your utilization low.
However, this type of card usually comes either as secured cards (require a security deposit which equals to your credit limit and it’s refundable when the card is closed), unsecured cards (does not require a security deposit, targeted at people with poor credit, higher risk and lower credit limits) or student cards (can either be a secured or an unsecured card, lower fees, and purely targeted at student).
Also, if you need cash back or want to earn points, get a card that offers a reward. This is designed for those with a good excellent credit score. It offers bonuses whenever a certain amount is spent – which can be in the form of a statement credit or direct deposit.
So, your spending habit should determine what you are willing to do at gaining more points.
What is the card fee?
Are you comfortable paying yearly fees on your card? This will help you to see if what you get in return is good enough to cover the annual fees you are paying.
For instance, with an annual fee of $550 – the Chase Sapphire Reserve comes with a $300 travel credit every year, unlimited visits at an airport lounge, and a Global Entry credit. Ordinarily, the fee for a priority pass airport lounge membership is $429 yearly. Therefore, despite its high annual fee – this card is a good choice for the regular traveler.
However, there are cards with less annual credit card fees but their welcome bonuses and other Value Added Services on it make up for it.
Other forms of fees are late fees, finance charges, foreign transaction charges, cash advance fees, late payment fees, returned payment fees, over-limit fees, and balance transfer fees. So, all these fees must be considered while selecting the best credit card that will meet your needs.
Select a card that offers the best benefit
At this point, you should know your credit score and the type of card you can qualify for, the card that matches your goals, the perks on the card, and the ease of paying the fees.
However, you look for cards that offer your needs by way of the benefits they provide. Therefore, you should be sure that your returns should be enough to pay for your yearly fees (where applicable).
So, when you have finally picked a card, you must ensure to link it to all your income and not just your income. Besides, students can link to all scholarship relief, grants, or even allowances from parents – whereas others can link the card to spouse or partner’s income.
Final Thoughts
Why choose a credit card in the first place? It helps you to fulfill your financial goals in the best and efficient way. So, you must know your credit score, you must know the type of credit card you need, it is also important to know the card fees, and also select the card that offers the best benefit.
So, you should not just stop at selecting the best credit card – efforts must also be put in place to use the card in the right way to enjoy all the perks attached to it. if you want to build a good credit score – all bills must be paid in full every month.
Thank you for this article; it was extremely helpful in deciding on my first card.