Best Credit Cards

How to Choose the Best Credit Card for You

When you start shopping for a new credit card, the number of available choices can be startling. Thankfully, despite the array of choices, zeroing in on the right card for your wallet may be easier than you think. All it takes is a bit of time and consideration, as outlined by the following steps:

1. Consider your short-term and long-term plans

   Before you start wading through your options, take some time to jot down your short-term and long-term financial plans. This list should include everything from vacations to paying off debt and building your savings.

   Some people may think this exercise is a hassle but consider this: with so many credit card options available these days, there’s bound to be one that will help you accomplish your long-term goals while also making it easy to pay for your immediate needs. Why not put in a little extra time to help simplify your future situation?

2. Understand your credit card and other financial habits

   Similar to the first step, taking the time to consider your spending habits will help you better determine the type of card that meets your needs. When evaluating your financial patterns, remember to take the following into account:

   • Do you pay your credit card balances in full each month?

     If you answer “yes,” then you won’t have to focus on the lowest rate cards, giving you the freedom to look for a card that has other perks, like rewards.

   • Do you have a steady income?

     If your monthly income changes by season, then you will likely want to look for a card that has a lower rate, so you can minimize interest in the months when your budget is tight.

   • Do you have an established credit history, and if so, how does it compare to others?

     If you are new to credit or have a troubled credit history, then you may want to include secured credit cards in your search. Secured credit cards are tied to a savings account, reducing the card issuer's liability and increasing the likelihood that the company will give you credit. These cards also provide you with the opportunity to establish a responsible credit card history to help boost your credit score.

   • Do you use your credit card only for emergencies and large purchases, or is it your everyday payment method?

     The answer to this question will help you determine if you should look for a high limit card and what types of rewards would be most helpful for your lifestyle.

3. Decide whether it will be used for business or pleasure?

   One of the last factors to consider before you start browsing the available cards is whether you’ll be using your credit card for business or personal expenses.

   While it can be tempting to use just one credit card for all expenses, especially if you’re trying to accrue rewards points for an upcoming vacation, it’s smart to keep your business and personal expenses separate. This distinction will help reduce accounting headaches. Thankfully, quite a few credit cards are specifically designed for small business, so if it’s a business card that you need, you have plenty of decent options.

4. Know the players

   These days, credit cards can be classified into quite a few different categories. Now that you’ve evaluated your goals and credit card behavior, you should be able to narrow your focus to the category of credit card that best meets your needs:

   • Traditional: These are the “plain vanilla” cards. They may have a couple of perks, like rental car insurance or identity theft protection, but for the most part are devoid of fancy bells and whistles. This doesn’t mean that you should automatically discount these cards – often, they don't have annual fees and they offer fantastic rates.

   • Student: These cards are designed for younger consumers who are part-time or full-time students. Many of these cards have rewards programs oriented toward the wants and needs of younger 20-somethings. They also tend to have lower fees.

   • Cash Back: These credit cards provide cardholders with the opportunity to earn back a small percentage of the money they charge to their card. This is a great option for consumers who are looking to reduce their expenses or save toward a specific goal.

   • Rewards: There is a wide array of rewards cards now available, with rewards ranging from travel to gas to merchandise. If this is the route you are likely to go, be sure to research the available rewards programs to find the ones that you are most likely to truly use.

   • Balance Transfer: Designed for the consumer with existing credit card debt, a balance transfer card allows you to transfer over your existing credit card debt to your new card. Often, these cards offer fantastic introductory programs that will give you anywhere from 6 to 18 months interest-free. This provides you the opportunity to pay down your debt to reduce your interest payments.

   • Business: As mentioned previously, a whole set of credit cards are designed with businesses in mind. The business category includes many cash-back and rewards options, so you’ll want to take your time when choosing the right card for your business.

5. Examine the costs

   When you start to explore the cards that match your needs, don’t forget to pay attention to the costs of the cards, including their annual fees and interest rates. If you’re an international traveler, you’ll also want to compare foreign transaction fees.

   Many cards have special introductory offers that include 0% interest on new purchases and balance transfers during the first several months of the card. While these offers can help you start off on the right foot, you’ll also want to know the fees and rates that you’ll be charged once the introductory period ends.

   Just because a card has slightly higher fees or rates than another card doesn’t mean you should eliminate it from the list. Instead, take the time to evaluate the benefits that come with the card. If you will truly take advantage of the deals, rewards, or other perks associated with the card, then those benefits may just outweigh the costs.

Choosing a credit card is a very personal experience. You can’t rely on someone else to tell you which card is best for you. But with the five steps outlined above and your intimate knowledge of your needs, the decision doesn’t have to be difficult. After a little bit of reflection and research, you’ll have the right credit card in your wallet in no time.