Consider these factors to find the credit card that best suits your financial needs and goals:
When youre looking for a new credit card, choosing the right one can seem daunting. With so many options in the marketplace to consider, its easy to get lost in a sea of credit card features, rewards and terms.
Of course, interest rates, fees, and other features are important, but the most important thing is that the credit card you choose should fit your personal financial needs and goals. Keep these six factors in mind when youre choosing a new credit card.
Choosing a new credit card can be overwhelming with hundreds of options to consider To make the best decision for your needs, it’s important to look at several key factors when comparing credit cards This article will go over the most important items to evaluate so you can confidently select the right card.
Evaluate Your Credit Score First
Before you apply for a new credit card, you should first check your credit score. How much you can borrow and what terms you can get will depend a lot on your credit score.
People with good credit (scores around 800 or higher) can get the best rewards credit cards with the lowest interest rates. If your score is fair or poor (usually under 640), it will be harder to get approved for the best rewards cards. However, people with lower scores can still get credit cards that help them rebuild their credit, like secured cards.
A lot of banks and credit card companies let you check your credit score for free. This lets you check your credit score before you apply, so you know what to expect.
Compare Interest Rates
If you ever want to carry a balance on your credit card, the interest rate is very important. Things could change in the future, even if you pay in full now. By comparing interest rates, you can find the credit cards that charge the least to borrow money.
For consumers with great credit, cards with interest rates around 15% or lower are ideal. Average rates range from 20% to 25% currently. Those trying to rebuild credit will see higher rates but could still find options under 30%.
Keep an eye out for:
- Introductory rate: 0% for a set period of time (12-18 months typically)
- Penalty APR: Rate hike if a payment is very late
- Default rate: Interest rate after intro period ends
Review Fees
Credit cards often charge fees that add to your costs. Watch for these potential fees when comparing cards:
- Annual fee: Charged yearly for having the card
- Balance transfer fee: Fee to transfer debt from another card
- Foreign transaction fee: For using card abroad
- Late payment fee: If payment is past due
- Over-limit fee: For exceeding your credit limit
Avoid cards with multiple fees unless the rewards justify the costs. Opt for no annual fee cards if you want to minimize expenses.
Compare Rewards and Welcome Bonuses
Many credit cards offer lucrative welcome bonuses and ongoing rewards to entice customers. Compare potential earnings to pick the best option.
- Welcome bonus: Earned by spending a certain amount shortly after opening
- Cash back: Fixed rate or bonus categories to earn cash rewards
- Travel rewards: Airline miles, hotel points, or flexible rewards programs
- Rotating categories: Bonus categories change periodically
Calculate expected earnings based on your spending patterns. Remember to see if you can realistically earn the welcome bonus amount within the required timeframe.
Review Perks and Benefits
Credit cards include perks beyond just rewards, so review what added benefits are included. Compare the extras each card offers:
- Travel protections like rental car insurance
- Purchase protections for items bought on the card
- Cell phone insurance
- Extended warranty protection
- Airport lounge access
- Statement credits for certain purchases
- Concierge service
More premium travel credit cards tend to offer the most extensive benefits. Make sure any annual fee seems justified by the perks before paying it.
Consider Credit Limit and Approval Odds
Finally, evaluate your approval odds for a given card and note the minimum and typical credit limits. Issuers have their own requirements that affect approval. For example, you may be denied if you’ve opened too many cards recently.
Those new to credit may only qualify for a lower limit at first. Compare your credit report details to the card’s qualifications. Getting denied negatively affects your credit score so check your approval odds first.
Start your search for the best card for your needs by checking for prequalified offers from issuers. This helps narrow down your options without a hard credit inquiry until you formally apply.
Bottom Line
Selecting a credit card involves much more than just comparing rewards and interest rates. By evaluating your credit score, various fees, bonuses, benefits, and approval odds, you can determine the ideal card for your financial situation. Weigh each of these key factors carefully as you compare options to make the optimal choice.
Credit Score Requirements
One of the most significant factors to consider in a new credit card is its credit score requirement, which can significantly impact your odds of approval and your account terms if you are approved.
Not all credit card issuers have (or share) minimum credit score requirements for their cards, but they may offer some general guidance. For example, certain cards may be better options for people who fall within specific credit score ranges, like “fair” or “very good.”
The FICO® ScoreÎ, which is used by 90% of top lenders, ranges from 300 to 850 and is categorized into five ranges:
- Exceptional: 800-850
- Very good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300-579
Experians card comparison tool can show you recommended FICO® Score ratings for each card. You can get your credit score for free from Experian to see where your FICO® Score stands and then apply for cards that align with your score. Or you may want to improve your score first, and then apply after it increases. Doing so can increase your chances of a successful application.
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Credit card fees can impact your cost of using the card even if you never pay interest. Here are some the most substantial fees to consider:
- Annual fee: Getting a card with an annual fee is generally a bad idea if you dont spend enough to take advantage of the cards benefits. However, if the value of the cards rewards and benefits exceeds the fee, it may be worth paying the annual fee.
- Balance transfer fee: Balance transfer fees are often around 3% to 5% of your total balance transfer amount, or $30 to $50 for every $1,000 you transfer. You may save money by finding a card that charges a lower balance transfer fee.
- Late fee: You may obtain a credit card that doesnt charge late payment fees, although that is rare. Generally, card issuers impose late fees ranging from $30 to $41. Avoid late fees by creating payment reminders or setting up autopay for at least the minimum payment account. (This is also a key to protecting your credit.)
- Foreign transaction fee: A foreign transaction fee may apply when making purchases outside the U.S. or shopping online if the purchase isnt in U.S. dollars. You can save up to 2% or 3% per foreign transaction by choosing a credit card that doesnt charge this fee.
How To Choose The RIGHT Credit Card (The EASY Way)
FAQ
Which items are important to consider when selecting a credit card?
Annual Percentage Rate (APR). You can compare the APR for different cards which will help you to choose the cheapest. You should also compare other things about the cards, for example, fees, charges and incentives.
Which factor is the most important when deciding on a credit card?
Credit Score Requirements – So, from an issuer’s perspective, your credit score is the most important factor in evaluating an application. May 17, 2024.
Which item is important to consider when selecting a credit card Quizlet?
Which item is important to consider when selecting a credit card? Both APR and fees.
Which item is important to consider when selecting a credit card: an annual percentage rate APR B fees C the look of the credit card D both APR and fees?
The Annual Percentage Rate (APR), credit limit, and penalties and fees are all important things to think about when choosing a credit card because they have a direct effect on how much you can borrow and how flexible your finances are. A lower APR means lower interest charges, while a higher credit limit provides more purchasing power.