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How to Pick the Best Credit Card for Yourself [Step by Step Guide]
How to Pick the Best Credit Card for Yourself [Step by Step Guide]

How to Pick the Best Credit Card for Yourself [Step by Step Guide]

A credit card is a fantastic tool but can equally inflict damage on your finances if you misuse it or pick up the wrong one. You will have to be diligent while picking up the right credit card partner to meet your needs.

There can often be circumstances when you do not have a choice. The most common reason is a low credit score. There are different ways of checking, but a score below 670 would cripple your chances of scoring a suitable card. Most companies use FICO Score to assess customer expected risk and make the credit decision.

Credit cards have become an integral part of our lives; we see messages in our everyday lives. Given the importance, many providers claim to have the best credit card offers for you, but instead of believing in their marketing messages outright, you must find the best credit card for yourself.

This article discusses things that you must keep in mind while choosing the best credit card for yourself.

Things to keep in mind while choosing the best credit card

The term “best credit card” is a highly subjective one. What looks best for you may not suit your friend at all, and vice-versa. When you go out in the market, you may be overwhelmed after realizing the number of options available.

But when you dig deep, you will know there is only a handful of them ticking all the boxes for you.

So we would suggest you look for the credit card that suits you the best instead of the “best” one.

Why do you need the card?

Before you start looking for the best credit card, you must understand why you need one. If you are looking for borrowing abilities, your card needs will differ from those looking for exclusive deals.

If you are trying to build a credit history, look for one with the lowest annual cost and upfront security. The needs differ from one person to another, and you cannot judge your needs based on the card chosen by someone else.

One important consideration is the safety factor cards offer.

The differences between a debit card and a credit card
The differences between a debit card and a credit card

When you are a fraud victim through a debit card transaction, the money goes missing from your account. In contrast, when the thief uses your credit card for fraudulent transactions, all you have to do is inform your lender within the requisite time, and they stop the payment for the same immediately.

Unlike with debit cards, where the money leaves your account, you won’t have to pay for any of the fraudulent transactions with a credit card.

Have an idea about where you spend

Before you sign up for a credit card, you must understand your spending habits. If you are inclined towards a particular category, say travel, then the travel credit card may suit you. Similarly, if you do a balance transfer, the balance transfer cards are your best bet.

It is imperative for users with foreign transactions to choose a card with zero foreign transaction fees. If you plan to carry a forward balance for several years, choose a credit card with a low ongoing APR.

Look at the range of rewards available.

Credit cards and rewards go hand in hand. There are individual cards dedicated to those who have specific spending habits. Also, there are those which offer cashback and other rewards across categories.

If you choose a co-branded credit card, you will benefit from earning from your day to day spending.

Also, some cards entail you to earn miles for the amount you spend. You can then redeem them on your next flight ticket and secure a sizable discount by continuing to do what you always do.

Find the right credit card type.

Credit cards can be segregated into three primary categories:

  • Rewards
  • 0% Introductory APR
  • Building Credit

The rewards credit card is for those without any debt. These cards come in various sizes, and you can opt for cash back, miles, points, and other discounts in many categories. You can redeem the points or miles while paying airfare, hotel bills, and other similar expenses.

The 0% Introductory APR is for those who want to finance new purchases or get out of debt. It may not help you get as high discounts as available with rewards cards, but you will still benefit nevertheless.

Look for those options that provide you with the highest introductory APR period, make sure to know the post-introductory APR, and plan to pay down the balances.

The building credit cards are for those with an average or low credit score. These demand an upfront security deposit, and you can then use them as a standard credit card.

Depending on where you stand financially and your needs, you can choose to go with any of these.

Look into the fees and T&C.

After zeroing on the type of card that suits you the best, the next step is to look around for the fee structure from various providers and the attached terms and conditions that come along. The cost includes annual fees, foreign transaction fees, APRs, and late payment fees.

If you find it challenging to choose the best credit card for yourself, you can file a pre-qualification form to check if you are eligible. It neither guarantees approval nor does it harm your credit score in any manner.

It would merely give you a rough idea of the possibilities. Not everybody offers pre-qualification. Make sure it is stated that your credit will not be affected before going forward with pre-qualification.

Make sure you choose a card that offers the best benefits for the money you will pay.

Also, look for cards that are universally accepted. It ensures that you can travel around the globe and will never have to worry about being short on cash. These benefits are rarely available with debit cards.

Understand your credit score and other requirements

As mentioned above, your credit score will be a crucial factor in determining your eligibility for a credit card. Even though several different models are available, over 90% of lenders in the US use FICO Score.

FICO Scores are calculated using different pieces of credit data in your credit report. Here are the five categories of data that influence your FICO score: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

Composition data of the FICO score
Composition data of the FICO score. Source

FICO takes on the following score ranges:

  • 300 to 579 – Very Poor
  • 580 to 669 – Fair
  • 670 to 739 – Good
  • 740 to 799 – Very Good
  • 800 or above – Excellent

After figuring out your score, you can then understand how many options you have. A good credit score will ensure you get an appropriate card, provided you meet the other criteria. If you fall in the higher categories, we would suggest it would be best to ignore lenders who operate lower credit scores for approval.

Get the right credit card for you today.

Selecting three good credit cards is easy, but deciding the best credit card can often be tricky. Given the benefits of using a credit card, you can usually get swayed. But you must throw caution in the air and ensure that you won’t indulge in unnecessary expenses.

Also, make sure that you pick one that ticks all the boxes and is within your budget. Even when you have chosen the right credit card, you must diligently pay your dues and stick to your debt repayment plan.

In case you are looking for mustering rewards, ensure that you transact with the card regularly. For those looking to build credit, it is imperative to understand that a wrong credit card can further plummet your position.

Make smart decisions, but don’t settle for less.

What’s your experience with credit cards? Share the good and bad with our community.

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