However, getting a credit card should not be as frightening of a task as so many people make it out to be. In fact, my experience is proof of how useful and amazing credit cards actually can be.
With that being said, it’s worth noting that choosing the right credit card can still be a crucial decision to make. Making the right choice gives you access to benefits like cashback rewards, while making the wrong choice (based on your situation) can put you in a place filled with unnecessary fees and debt.
My guide will help you make the right decisions when it comes to choosing your next financial best friend (in the form of a credit card, of course). In total, choosing the best credit card for you includes analyzing your current spending habits and regular expenses, identifying which categories you spend the most on, and more. So without further ado, let’s get into the nitty-gritty of the finances.
Understanding Your Spending Habits
Before diving into the different types of credit cards, it's important to understand your spending habits. This will help you identify which card features will be most beneficial to you.
I also took the time to understand my own spending habits. Now, I’m lucky to say that I tend to get about $30 in cash-back rewards every month. And that’s just from my first credit card, which I’ve been using for about a little over a year now!
Analyzing Your Regular Expenses to Make the Most Out of Your Benefits
If you tend to go to the mall and go shopping crazy, a card that features rewards based on that category would fit you the best. And, if you’re like me and spend most of your money on food, it would benefit you the most to go with a card that features bonus points for purchases at grocery stores and fast food restaurants.
Take this credit card for example: The U.S. Bank Altitude Go Visa Signature Card. This was my first credit card. I got it because it featured a mouth-watering 4x points for every dollar I spent on qualifying fast-food/restaurant purchases.
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| Photo Taken Directly From US Bank Website |
It is important to note that I chose this card because I already knew that I spent the bulk of my money on food, so don’t get that card just because I recommended it. The point you should take from this is simply to know where you spend your money the most so that you can take the most advantage of the rewards your future credit card will award to you.
So if you know your car is a gas-guzzler, go ahead and get the credit card that gives the most rewards for purchases in that category. You can also try to find cards that give high rewards for multiple different spending categories.
Let’s go back to my first credit card, the one provided by US Bank. You probably have already seen that the card gives 2x points for every dollar spent on gas and EV charging stations. I decided that I should definitely get that card since that was my next top-spending category.
My point is that you most definitely want to find the best option for your specific situation. Also, you will likely be able to do so with a bit more research. Even if you feel your situation is like no other (which, in reality, it isn’t because there are too many people in this world for that to be possible), I know that you will be able to find the perfect card for yourself so long as you keep reading for more tips.
The Different Types of Credit Cards
I may have gotten a bit ahead of myself by talking about the rewards you can get from different credit cards. After all, we haven’t even talked about the different types of cards you can choose from! No worries, though, because we’re going to take a moment to go over that now.
Cashback Cards
Cashback cards provide a percentage of your spending back in the form of cash rewards. They are straightforward and flexible, making them a great option for those who prefer simplicity and direct rewards.
Cashback cards are always a winner in my book. There is something magical about getting something back for every dollar you spend. I implore you to look out for cards that offer rewards this way.
Rewards Cards
Rewards cards offer points for every dollar spent, which can be redeemed for travel, merchandise, or other rewards. These cards are ideal if you want to earn points on your everyday purchases and enjoy redeeming them for valuable perks.
My current card is a rewards card, but I am also able to turn in my rewards points for cash back. Make sure you are reading the full list of benefits of the card you are thinking about getting. It is very often that you are able to find multiple types of rewards within one card.
That way, you can focus on maximizing your rewards, rather than searching for other cards that may very well do the same thing.
Travel Cards
Travel cards are designed for-- you guessed it-- frequent travelers, offering rewards points that can be redeemed for flights, hotels, and other travel-related expenses. They often come with additional travel benefits, such as no foreign transaction fees.
There’s not much to say about these cards other than they are amazing for those who travel for work or even those who plan on traveling for fun. If you know that travel will take up a big part of your life, it is never a bad idea to get one of these cards.
This is especially true for those that offer no foreign transaction fees. Remember that, if you get a card that does have foreign transaction fees, those fees add up to real dollars. So make sure that, when looking specifically for these cards, you primarily go for those that don’t charge for purchases out of the country.
Low-Interest Cards
Low-interest cards are ideal for those who carry a balance month-to-month. They offer lower APRs, helping you save money on interest payments. Some even come with 0% introductory APR periods for balance transfers or purchases.
I am morally obligated to let you know that I would not personally choose a credit card based on low interest rates or even 0% introductory APR periods. The point of credit cards (in my opinion) is not to carry debt month-to-month. This is because the interest rates are always high for credit cards (I have yet to see a reasonable interest rate in my search for new credit cards).
Also, it is just a bad idea, in general, to plan on being able to forgo paying your card in full every month. That is the easiest way to put yourself in massive debt and just overall not a good plan. The point of credit cards is to be able to increase your credit score and to get rewards based on purchases you were ALREADY going to make.
That’s right, credit cards should never be your get-out-of-jail-free card. They should simply be a tool in your arsenal. For me, I’ve never liked to shell out money without getting anything in return, so that’s my reasoning for getting a credit card.
My point is that you should find your reason for getting a credit card. It needs to be something that will ultimately benefit you, NOT the credit card companies.
Look Out for Fees and Interest Rates
Deadly Interest Rates and Introductory Periods
Many credit cards offer a 0% introductory APR for a specified period, which can be beneficial for large purchases or balance transfers. If you plan on taking advantage of this specified period for balance transfer purposes, make sure to check the duration of the introductory period and the APR that will apply afterward.
As I said before, it is never a good idea to get a card specifically because of their low interest rates or possible 0% APR introductory periods. This is because interest rates on credit cards are going to be high in general, even with the “benefits” of low or no interest rates that credit card companies may offer you.
However, even though I make a point to avoid the interest rate that my credit card company would charge if I didn’t pay my balance off in time, it is still important that you know what you may be charged if you are unable to pay in time. This is because it is always important to know how much--if any-- money you would be charged if you are in a sticky situation.
*Note: Depending on your credit score, you can qualify for different APR rates. My belief still stands that all APRs are high, though.
Life happens, and that is okay. The biggest thing you will have to know is that credit card companies (unfortunately) hope you get into situations where you have to pay their ridiculously high interest rates. So, when life happens for you, they will absolutely have their hands out for the money you owe them, regardless of what your situation may be.
So, at the end of the day, regardless of what interest rates the credit card company says is a “deal”, make sure you know what the interest rate would look like should you have to pay it.
For example, let’s say that the interest rate for your future card is 23.8%. If you have a running balance of $1,000 on your card, that’s almost an EXTRA $20 you would be charged PER MONTH for as long as you haven’t paid what you owe.
The golden rule is to always pay your card in full every month. But like I said, life happens. So make sure you are fully aware of what you may be charged in case you are in a bad situation.
The Pros and Cons of Annual Fees
Some credit cards charge an annual fee, which can range from modest to significant. It's important to evaluate whether the benefits of the card justify the annual fee for your situation.
Although, in some cases, the rewards and perks can end up paying for the annual fees themselves. So you may very well end up not having to pay the fee at all! Make sure you carefully look at the benefits to decide this, though.
I like to stay away from cards with annual fees since they add unnecessary charges to your balances, but many upper-echelon cards charge annual fees.
I’m not where I want to be in life (currently) to want to go out and apply for a card with annual fees, but there are several cards that are actually well worth the additional price tag. In those cases, I say go for it!
Now Go Get Your Own Credit Card!
Choosing the best credit card requires careful consideration of your spending habits, the types of cards available, fees, interest rates, and additional perks. So it’s great that you now have a person that you trust to give you the guidelines for choosing the best credit card for you!
By understanding the factors we talked about today and matching them with your financial needs, you can select a card that provides the most benefits and aligns with your lifestyle. Remember, a well-chosen credit card can be a powerful financial tool, so take the time to make an informed decision.
You can even take a look at my other finance articles for more information on credit cards. If you think I missed something in this article, be sure to (kindly) let this wonderful community know your thoughts in the comments below.
Before you go, though, you know I have to let you know that everybody may not like me, but they have no choice but to love me because I will always be there for them and accept them for who they are. Happy card hunting!