When it comes to choosing the right credit card, there is no such thing as a silver bullet. The card that works best for someone else may be a terrible choice for you. For that reason, relying on personal recommendations or choosing your card based on what someone else says is not usually the best way to go about finding that perfect card. That said, it is possible to rely on word-of-mouth recommendations and reviews for measuring some of the pros and cons of a credit card. However, other pros and cons are more personal and require you to do your own homework with your own needs in mind.
Here are some things to consider when choosing the card that best fits your needs.
1. How are you going to pay off the balance? If you think that you will keep a balance on your card, your two best choices are a card with a 0% introductory APR on purchases or a card with a low fixed interest rate. Despite the immediate benefits of a 0% interest offer, a low fixed interest rate is often better than a lengthy 0% APR period because many cards that start at 0% APR have rates that spike to 19.99% or higher after the introductory period ends.
2. Don’t bother with a rewards card or a cash-back bonus card unless you plan to use it frequently and pay off the balance monthly. Most people who have rewards cards don’t spend enough to earn more than a few dollars in rewards. Others spend a lot but fail to pay off their balance monthly, so the interest payments cancel out any cash-back rewards. Of course, a rewards card might have some other trait that makes it attractive (such as the long 0% introductory APR offered by Discover’s cash back rewards cards). But getting a card only because you are attracted by the rewards programs is seldom a good idea.
3. Don’t overlook the fine print. If you are thinking of transferring a balance from one card to another, make sure that you read the fine print before doing so. Most cards charge between 2% and 5% of the transferred amount as a one-time fee. Occasionally, this fee is waived, but you have to read the fine print to see the details. Another thing that often catches people off guard is the percentage of the balance that is used to figure out the monthly minimum payment. This is especially true of you transfer a balance to a card with a 0% introductory APR. If you have to pay 5% or more of the balance off to make the minimum payment and the balance is $2,000, that’s $100 per month (more than most people would probably expect to pay monthly). You can avoid any expensive surprises by finding out how the minimum payment is calculated before getting the card.
4. Find the card with the most perks that work for you. Some people shy away from perks that they would enjoy because they are associated with a card that has an annual fee. For many people, avoiding an annual credit card fee is probably a good idea, but if you are a responsible spender who can benefit from the parks that are usually associated with annual fee cards, then it might be unwise to overlook these cards. Many companies allow you to try the card for free for a year before they start charging the annual fee. Discover and American Express have retail affiliates that offer high rewards points if you shop with them online. It can be worthwhile to check these affiliates before signing up for the card (or before crossing it off your list because of the annual fee). If you shop often at an affiliate, you can earn significant rewards points that would easily make up for any annual fees.