How to choose a credit card

When you are looking for a credit card, make sure you are asking yourself the right questions to find the best question for you.

1. What is the purpose of this credit card?

   Credit card is multifunctional. You may need a credit card to:

    Credit building. If you’re building credit, secured credit cards don’t have many perks, but they will address your needs. These are cards where you place an amount in the form of a refundable deposit and act as your credit limit, such as Capital One’s Guaranteed Mastercard. Then you spend up to that limit and make payments for what you have spent. Their goal is to help increase your credit so that you qualify for other types of credit, like other cards and loans.

   Use lower credit. If you have high rates of credit usage – or use more available credit – your credit score may decrease. Adding another form of credit, such as a credit card, will add to the number of credits you have available. This can reduce your credit usage (and increase your score).

   Reward rewards. From refunds to travel privileges, there’s no shortage of credit card rewards. You may want to narrow your selection to specific rewards (and subscription rewards) to get the most out of them.

   Debt consolidation. If you carry a high interest rate debt, whether through loans or other credit cards, you can get low or zero interest APR credit cards to help reduce debt.

2. Do I have credit to qualify?

   The better the benefit, the more you need to hop through multiple rounds to qualify for certain credit cards. Credit cards with attractive rewards programs or cashback rewards require higher credit than more basic credit cards.

 If you have poor or fair credit, you may only be eligible to build a secured credit or credit card. If you have excellent credit, you can easily qualify for any credit card you want. But if you do not get the correct score, you may not be eligible for the card you want.

 3. Will I carry the balance?

   While having a balance isn’t necessarily a bad thing, paying off your credit card every month shows that your lender only spends on what you can afford.

    There are some cases when you need to carry a balance. For example, if you make a large purchase, you may need more time to pay off (although be wary of high interest rates). If that’s the case, you might want to explore the 0% referral APR offer, instead of a travel reward or cashback card.

    Remember that even with a 0% referral offer, you are still responsible for the minimum, monthly payments on time.

4. Where will I use it most?

   Think about what you use your credit card on a daily, weekly and monthly basis. For example, a credit card reward reward (like Chase Freedom Unlimited) will reward you by depositing money directly into your bank account or giving you a credit statement.

   Refund cards are a good idea if you use them regularly at restaurants, grocery stores and gas stations. But the cards themselves vary greatly in how they reward you in the place you shop. Some have higher rewards and rewards for picnic, while others will give you better prices when you shop at wholesale clubs. (This is where some people engage in gaming credit cards, using different cards for different purchases, a fact that only fits reasonable budgets.)

   If it’s for travel, you might consider a general travel reward card or one for a specific airline or hotel. Many of the rewards cards are issued in the form of points or miles you can redeem on future trips (though, sometimes with restrictions or blackout dates). The way you use the card will determine which card you will receive. Also, consider whether the annual fee is higher than the perks.

 5. Is there an annual fee?

   The annual fee on the card can fluctuate very widely, especially when credit card offers change regularly. There can be annual fees as low as $ 35 or as high as hundreds of dollars.

   An annual fee is not a bad thing if you feel that the benefits far outweigh the cost. For example, if your reward or privilege pays more than the fee, you will be at the top. Many cards also offer fast sign up bonuses with reduced annual fees. Make sure you are discovering how you will use the card and estimate if the annual fee is worthy. You can then make a decision if the card is right for you.

   Some credit cards are guaranteed to charge an annual fee for usage, so if you plan to use one to build your credit, you may have to pay for that luxury. The goal would be to build credit, then switch to an unsecured credit card with the privileges balancing an annual fee (or absolutely no annual fee.)

6. Will it increase my credit score?

   When used wisely, credit cards have the opportunity to increase your credit score. But not all credit cards are reported to credit bureaus.

   If you are looking to build credit, having an unreported card to the credit bureau means your score won’t increase for responsible use. For example, Apple Cards do not report to credit bureaus. Although this card and others like it may be convenient to use, they do not help your credit increase. This may not be a bad thing if you have great credit, but if you don’t, that could hinder you from building yours.