Guide: How to Pick the Right Credit Card
The process of getting a new credit card is similar to shopping for a new pair of shoes; the best choice is going to vary widely from person to person, depending on factors such as lifestyle, habits, and what you plan to use them for. Someone who’s looking to get a pair of shoes for his daily run would be ill-advised if he purchased a pair of bowling shoes to meet that need! Similarly, someone who’s looking to earn cash back from their purchases would be ill-advised to get a rewards card that grants him airline miles on his purchases. So let’s take a look at the different factors you should keep in mind when shopping around for your next credit card:
What’s your credit score?
Just like how you need to set a budget before you go out shoe-shopping, you need to ask yourself “what kinds of cards do I have a realistic chance of being approved for?” Chances are high that if you’ve had a troubled credit history, you’re not going to be approved for the XYZ Uber-Premium Card with a ridiculously low APR. Just like your budget restricts which kinds of shoes you can buy, your credit score restricts which kinds of cards you can get. Fortunately, over time you can increase your “budget” for getting a new credit card by responsibly using credit, but that is a subject for another article.
Do you plan on carrying a balance?
When you’re buying a pair of shoes, you often need to consider whether or not you plan to subject the shoes to a lot of physical punishment; how often do you plan to wear them? Are you looking for a pair of work boots or a pair of dress shoes? When selecting your credit card, a similar question to ask is “How often do I plan to carry a balance on this card?” if your answer indicates that you do plan to carry a balance on a regular basis, or are in the process of paying down an existing balance, then one of the top factors to consider in your card-shopping is the APR, the “cost” of carrying a balance on your new card. If you don’t anticipate carrying such a balance, instead planning to pay off the balance each month, then other factors, such as rewards programs, may be more important in your decision-making process than the interest rate on your new card.
Rewards Programs
Sometimes, when buying your shoes, you want to compare the relative benefits of different kinds of shoes; for instance, if you want to get the most maneuverability and traction on a wrestling mat, you probably don’t want to buy a pair of basketball shoes. While there is nothing wrong with basketball shoes, they don’t meet your specific needs as well as a pair of wrestling shoes would. As with shoes, you need to ask yourself “What kinds of benefits or advantages do I want to get when I use my new card?” There are a wide array of rewards programs to choose from these days, so whether you’re looking to get cash back, gift cards, free airplane tickets, or something else, chances are high that there’s a rewards program for you.
Where do you tend to spend?
When aiming to maximize the value you receive on your hard-earned cash, it is often a good idea to consider “How often will I be wearing these shoes?” If you’re planning on playing a game of football once per year on thanksgiving day with your immediate family members, then you can probably find better uses for your money than buying a new pair of football cleats. Similarly, savvy card-holders looking to maximize their return on investment will acquire cards that net them additional bonuses or rewards for cash spent in their most common shopping categories. For example, if you’re one of the good old boys that thrives off of hunting, shooting, fishing, and tend to spend a lot of your money each paycheck at Cabelas, then perhaps you should consider getting a Cabelas credit card that gives you additional rewards for spending at Cabelas! Another one of my personal favorite examples of a card that earns extra rewards for common activities is the MTVU Student VISA card that earns five points per dollar spent at movies, restaurants, bookstores, and iTunes: arguably the top spending categories for many of today’s college students.
Can you trade it in?
Sometimes you don’t feel comfortable with shelling out for a new pair of shoes; you like your old ones, they’re just a little beat-up and worn out or behind the times. In cases like these, it often makes more sense to clean out and fix up your old shoes rather than buying an entirely new pair. Similarly, sometimes you may not be comfortable with getting a whole new credit card. You might be comfortable with your existing card’s payment schedule and so forth, but secretly wish that you could benefit from the rewards programs offered by one of the newer cards. In cases like these, it might make the most sense just to call up the card issuer and ask if you can “transform” or exchange the card you already have for one of the newer ones, carrying over your balance and account history. In many cases, you’ll find that the card issuer is more than happy to help, and you’ll carry over the payment history from your old card, but benefit from the rewards program associated with the newer card.
So before going out and getting a new card, sit down and ask yourself these questions:
1. What’s my credit score?
2. Do I plan on carrying a balance on this card?
3. What kind of rewards do I want?
4. Given my spending habits, which card gives me the most rewards?
5. Do I want a completely new card, or should I try to transform one of my old cards?
Ultimately, the best judge of which card you should get is YOU. While advisors can steer you in the right direction, the only person that is inherently familiar with your specific needs and desires is your own self. I promise that if you keep your answers to the above questions in mind as you research various card offers that you won’t go wrong. Remember, there’s something for everyone out there.
Good luck and happy shopping!
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