There are several important features to consider when applying for a credit card: Interest Rate, Credit Limit, Fees (if any), Rewards, etc. Most credit cards come with some form of rewards program, such as miles for air travel, points towards merchandise, or cash back based on a percentage of your spending. There are several combinations of these features, so how do you figure out what is best for you?
Your choice of credit card has to work for your lifestyle. For example, if you keep a balance on your credit card from month to month, then your priority should be a low interest rate. If you pay off your balance in full each month, then the rate isn’t as important and you can focus on finding a card with no annual fees and the best rewards program for you.
When it comes to rewards, think about what it is that you purchase. Do you travel a lot? By car or plane? There are gas cards available that allow you to earn free gas by using the credit card. Similarly, there are cards that reward you with miles/points towards purchasing airfare. If you’re not a traveler, find a card that offers cash back on purchases. Many cards will give you 1% back of the amount you charge every month. So, if you spend $800, you get $8 back. Some cards will even give you back a higher percentage on specific purchases, like 5% on grocery or gas purchases.
There are other features to consider as well. You want to be aware of the penalty fees that a card will charge you for things like late/missed payments. You may also be interested in the rate that a credit card charges for balance transfers. If you’re interested in transferring the balance of one credit card to a new one, then you’ll want to find a card that offers 0% interest rate for doing so. The idea would be to lessen your debt by transferring to a low-interest card. Also, there can be a separate fee for balance transfers, which will be a percentage of the amount. This percentage will vary.
You may not be able to find the “perfect” card for you. Everyone wants the low rate, high limit, no fees, high rewards card, but everyone is not eligible for that. So figure out what is important for your financial situation, and choose a card that will allow you reap the benefits of credit and build a positive history.
Also be aware of the impact that new credit cards have on your credit score. There’s nothing wrong with obtaining new credit, just don’t pursue several new accounts in a short period. This can give the appearance of over-extension to the credit reporting agencies, and hurt your credit score.
Credit cards, if used responsibly, are great tools for building a positive credit report. Plus, the rewards you can receive are essentially free money. Just remember that these rewards programs are designed to get you to spend more. You can reap the benefits of the reward program if you stick to your ordinary spending. Use the card for your regular purchases and pay the balance each month. This way, you’re not spending more than usual, and you’re getting something in return.