How to pick a credit card that’s right for you
Want to build credit, finance a big purchase or travel the world? Different types of credit cards are designed for different needs. Chances are, there’s one out there that might support your financial goals.
But each card may have its own eligibility requirements, perks and fees. And with so many options available, you might wonder how to choose a credit card that’s right for you.
It may boil down to knowing what you want out of a credit card, knowing which cards you qualify for and shopping around for the best offer. These tips could help you narrow your search.
Key takeaways
- Eligibility requirements may vary by credit card issuer and card type, but things like creditworthiness and credit scores are often considered as part of a credit card application.
- There are several different types of credit cards—like rewards cards, travel cards and secured cards. It may help to look for credit card features that align with your financial goals and spending habits.
- Consider the costs of using a credit card. Some cards charge annual fees or foreign transaction fees, while others don’t.
- Applying for a credit card could trigger a hard inquiry and cause a temporary drop in credit scores. That’s why it’s recommended to only apply for credit when you need it.
What credit card should I pick?
Every credit card is unique, and so is every cardholder. The ideal credit card for one person may not be the best fit for another.
So when you’re picking a credit card, it’s helpful to keep your credit situation, spending habits and goals in mind. Here are some steps that may help you find the right fit.
1. Assess your credit
Your credit scores could affect which credit cards you’re eligible to use. Credit card issuers may use these scores to help determine which interest rate and credit limit to offer, too. That said, checking your scores could help you get a sense of the cards you may qualify for.
Wondering what credit score is needed for a credit card? The short answer is that it depends on the card. Some cards require good or excellent credit, while others are made for those with fair credit.
Keep in mind that submitting a credit card application may trigger a hard inquiry. This type of credit check could cause a slight dip in credit scores.
One hard inquiry may not have a big impact on credit health. But it’s typically best to avoid several hard inquiries in a short amount of time.
2. Learn about the different types of credit cards
When you’re figuring out which card to apply for, it helps to know what’s out there. Learning how different types of credit cards work could help you find the right fit.
- Cash back and travel rewards credit cards: Every time you make eligible purchases with a cash back credit card, you could earn a percentage of what you spend. A travel credit card typically lets cardholders earn points or miles and redeem them for rewards like flights and hotels.
- Secured credit cards: A secured credit card may be a good fit for someone with less-than-perfect credit. A deposit is typically required to secure a line of credit. The card issuer may hold the deposit while the account is open.
- Student credit cards: Student credit cards are designed for college students with little or no credit history. They may offer lower credit limits, higher interest rates and perks geared toward younger cardholders.
- Balance transfer credit cards: A balance transfer credit card allows you to transfer debt to the card. It’s typically used to consolidate debt, get a lower interest rate and make it easier to pay down the balance.
- Promotional interest rate credit cards: Two common types of promotional interest rate credit cards are 0% APR cards and deferred interest cards. Both types may offer special financing during the introductory APR period. But once the promotion ends, an outstanding balance could be subject to the regular interest rate.
- Business credit cards: A business credit card is designed for those who own a business. Wondering whether a personal credit card or a business credit card is better for you? Business cards can help keep company-related expenses separate from personal accounts. And they typically have higher credit limits and more rewards opportunities.
- Charge cards: A charge card typically requires cardholders to pay their balance in full each month. Instead of setting a credit limit, the card issuer may approve purchases based on the cardholder’s financial habits.
- Store credit cards: There are two types of store credit cards. A private label store card can only be used at the store, or group of stores, it’s associated with. A co-branded general purpose credit card could be used anywhere that accepts the payment network shown on the card.
3. Consider your reasons for getting a credit card
Once you review the different types of cards available, you may want to ask the following questions:
- What are your credit goals? When used responsibly, credit cards are financial tools that can help people reach their financial goals. Think about the main reason you want a card. Also consider how card terms and features—like annual fees, interest rates and rewards—could affect your ability to achieve these goals.
- How do you want to use a credit card? Looking for simple ways to save on groceries? A cash back credit card could help you earn money on eligible purchases. But if you want to earn miles or points for your next trip, a travel credit card may be a better fit.
- Can you get a credit card without credit history? If you want to build credit from scratch, responsibly using a student card could help establish credit history.
- Are you looking to finance a big purchase? Some people finance big-ticket items with credit cards to take advantage of 0% APR offers or earn rewards. But before you swipe your card, consider whether you can afford to pay off the balance.
- Do you want to pay down debt? You could use a balance transfer card to move high-interest debt to an account with a lower interest rate.
4. Review fees and interest rates on potential credit cards
Once you’ve narrowed your search, it’s a good idea to learn how credit card interest works. You may also want to review some common credit card fees:
- Interest charges: Interest is the cost of borrowing money. For credit cards, it’s usually shown as an annual percentage rate (APR). If you want to avoid interest, consider paying off the card balance by the due date every month.
- Annual fee: Some issuers charge an annual fee to keep your account open. If you’re looking to keep costs low, you may want to consider a credit card with no annual fee.
- Late fees: If you don’t pay your card’s minimum payment by the due date, you may be charged a late fee. Late payments could also show up on credit reports and affect credit scores.
- Balance transfer fees: A credit card issuer may charge a fee for transferring a balance over from a different financial institution. The fee could be a fixed amount or a percentage of the transferred amount.
Picking a credit card FAQ
Finding the right credit card may take a bit of research, so don’t be afraid to ask questions. You may want to keep the following in mind as you shop around for the best offer.
How do I choose a credit card for the first time?
It’s a good idea to learn how credit cards work before you apply for your first card. You may want to review some credit-scoring basics, too. Think about how you plan to use the card, and check your credit to see which ones you may qualify for.
Once you understand your options, you could compare offers to see which card might work best for you. Submitting a credit card application can trigger a hard inquiry, which may cause a slight dip in scores. But using the card responsibly—by making on-time payments and keeping the balance low—could help you establish credit over time.
How long does it take to get a credit card?
When you submit a credit card application, the card issuer must review your application and tell you their decision within 30 days. If your application is approved, you can typically expect to receive your new card by mail within 7 to 10 days.
You can read more about the amount of time it takes to get a credit card.
What’s the difference between a prepaid card and a credit card?
Unlike credit cards, prepaid cards aren’t tied to a line of credit. Prepaid cards are loaded with money that can be used to make purchases. Once the money is spent, you could reload the card with more funds.
A prepaid card may be a good option if you don’t want to carry cash, or if you’d like to limit your spending. And unlike with credit cards, you don’t need a credit check to use one. But prepaid cards may charge fees for reloading funds, withdrawing cash and more. And you can’t typically use a prepaid card to build credit.
What credit score is needed to get a credit card?
Different credit cards may have different credit score requirements. A higher credit score might help you qualify for better offers.
For example, you may need good to excellent credit to qualify for a rewards card or a travel card. But student cards may have lower credit requirements.
A less-than-perfect credit score won’t necessarily prevent you from getting a credit card. But it may limit your options. If you have poor to fair credit, using a secured card responsibly could help build good credit scores over time. And it might put you in a position to graduate to an unsecured card.
Keep in mind that credit scores can also influence the credit limits and interest rates you’re offered. If your credit needs work, you could try to improve your scores before you apply for a credit card.
Picking a credit card in a nutshell
With so many options to choose from, picking a credit card can feel overwhelming. Checking your credit scores can be a good starting point. And knowing which cards you qualify for can help narrow the search.
Also, think about why you want a credit card and how you plan to use it. Once you know which cards you qualify for and the type you want, you can compare different options.
Don’t forget to review the interest rates, fees and rewards that each card may offer. If you need help choosing the right card, you could compare credit cards to find a good match.