The promise of earning valuable perks from a credit card can be exciting. However, choosing the best card to add to your wallet is not always as easy as you think.
There are many factors to consider before you fill out an actual application. At the very least, you need to consider your spending habits, the types of rewards you value most, and the type of credit cards you’re likely eligible to use at this time.
Here’s everything you need to know about choosing a credit card.
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Check your credit report
Step one to choose the right credit card is to check your credit report from Equifax, TransUnion or Experian. When you apply for a credit card, your credit condition will have a significant effect on whether or not you will be approved. You can check all three of your credit reports every 12 months for free at AnnualCreditReport.com.
Be sure to go through each report in detail. Get to know how your credit is formed – good, bad or otherwise. You should also check for errors and report them. Credit errors happen and they can unfairly lower your credit score. If you find errors, you can dispute them with the credit bureaus. Provided by the Consumer Financial Protection Bureau sample dispute letter that might be helpful.
You can check your credit score as well, although the score you find online will likely be different from what your lender sees. Credit card issuers have different minimum credit score requirements for different cards. So, if you find that your credit score is currently in the “fair” range, it’s probably not a good idea to sign up for a premium rewards card that claims excellence or good credit to qualify.
Related: 6 things to do to improve your credit score
Understand your spending habits
Next, you should look back and examine your spending habits. Do you spend a lot of money each month on groceries to feed a large family? How often do you order takeout or dine in?
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With the right credit card strategy, you can enhance your bonus earning potential across different spending categories. For example, there are credit cards that offer extra rewards when you spend on certain categories:
When you choose a credit card that offers higher rewards for purchases you make often, you can earn more points, miles, or cashback (depending on the card type).
Take dining as an example and imagine you spend an average of $1,000 per month on food and drink. You can earn up to $20 per month (or $240 per year) with a 2% cashback card like Citi® Double Cash Card (1% when you buy, plus 1% at checkout).
Now, let’s say you put together $1,000 in monthly dining deals on Chase Sapphire Reserve®. You’ll earn 3 points for every dollar spent for a total of 3,000 Ultimate Rewards points per month (or 36,000 per year). Based Our pricing of Chase points is 2 cents each, 36,000 points That Ultimate Bonus could be worth up to $720 in bonus money – that’s a lot more for your coin.
Related: These are the best credit cards for everyday spending
Research different types of cards online
Once you know your credit score and identify your major spending categories, you’re ready to start sifting through credit card offers. At this point, you should be trying to figure out which credit card features are the most appealing and how you plan to redeem your points.
For example, if you have a specific trip and you know which airline you want to use, you might want a branded airline card or choose a card that offers flexibility in remittance partners, like Chase Sapphire Preferred® Card.
Here are some common credit cards to consider:
Branded airline and hotel credit cards
Branded Airlines and hotel credit card ideal for those who are loyal to a particular program but not enough earn elite status. These cards offer benefits that can make your trip a little more comfortable.
With an airline pass, you can get free checked baggage, discounts on in-flight purchases, and even advance to a position of excellence. Hotel credit cards, on the other hand, often offer mid-tier status, which leads to perks like room upgrades, free breakfast, and bonus points for a paid stay.
Bank bonus card
Bank bonus cards offer ultimate redemption flexibility. These cards often offer generous bonuses in daily spending categories.
When it comes to redeeming points, you have the option of cashing back or transferring points to airline and hotel flights – making these rewards incredibly versatile. If you choose one premium bank bonus cardyou can even take advantage of valuable perks like access to airport lounges and annual travel credit.
Some of our favorite banking rewards cards include Chase Sapphire is preferred, Citi Premier® Card and American Express® Gold Card.
Cashback credit card
Cashback credit card may be suitable for those who prefer to keep things simple regarding credit card rewards. There’s no rewards program to follow and you never have to worry about the card issuer discounting your rewards. Plus, cash rewards give you the ability to spend your earnings on anything you like.
Cashback card like Blue Cash Preferred® Card from American Express it’s great if you want to maximize daily spending categories like US gas stations, US supermarkets and select US streaming services.
The Citi® Double Cash Card is an option only if you want to earn cashback rewards is also possible High value exchange when combined with a higher premium card . And, for a limited time, it comes with a $200 cashback signup bonus after spending $1,500 on purchases in the first six months of account opening.
Free credit card every year
Free credit card every year may be suitable for those who want to minimize their out-of-pocket costs when earning rewards.
The Chase Freedom Flex is a great example of a high value card with no annual fee. Supply card rotate 5% cashback types where you can maximize your earnings. You can earn 5% cash back in rotating quarterly categories with your first $1,500 purchase each quarter you activate. The best part is if you also have Chase Sapphire is preferred or Chase Sapphire Reserveyou have the choice to pass these points on to Chase travel partners.
Related: How to Maximize Your Chase Ultimate Rewards
Learn basic credit card terms
As you shop around for credit cards that have all your boxes ticked, this will help you understand the basic credit card terms you’ll come across during your search. Knowing these terms will help you better compare offers from multiple card issuers and choose your favorite.
- APR: This stands for annual percentage – the interest rate that the card issuer charges you stated as an annual interest rate. Card APR may be less important than you think if you have no outstanding balance. With most credit cards, you won’t pay any interest if you pay the full balance on your statement by the due date.
- Fee: Credit card fees are additional costs that may be associated with certain credit cards. Common fees to be aware of are Annual fees, late payment fees, balance transfer fees and foreign transaction fees – a few of them. Credit card fees aren’t necessarily a deal breaker, but you should understand what you’re agreeing to before signing up for a new account.
- Minimum payouts: The minimum payment is the lowest amount you can pay your card issuer each month. If you don’t pay the minimum payment, you may have to pay late fees and possibly damage your credit rating.
- Exclusive right: In addition to rewards, some credit cards offer perks can be extremely valuable. Airline fee credit, TSA pre-check and Global Entry credit, access to airport lounges and car rental insurance just a few examples. Registration is required for some benefits.
- Reward: Credit card rewards are usually tied to how much money you spend in your account. Rewards can be in the form of points, miles or cashback that you can earn and redeem.
- Welcome Bonus: A welcome bonus or credit card sign-up bonus is an offer some card issuers do to attract new customers. Normally, you must spend minimum spending requirement to qualify within a few months of opening your new account. For example, that might be like “spending $2,000 or more in the first three months of account opening”. If you meet the spending requirement, you’ll get a certain number of points, miles, or cash back.
Related: TPG’s Beginner’s Guide to Credit Cards: Everything You Need to Know
Review credit application requirements
We’ve already discussed how important good credit is if you’re hoping to qualify for a new credit card. Suppose you want Maximize Your Chances Of Credit Card Approval. In that case, you should be aware of other factors that the card issuer may also consider, like household income and outstanding debt.
It may also be helpful to consider credit card app restrictions from different card issuers to see if any of them can hold you back. For example, American Express limits its once-in-a-lifetime welcome offers, while Chase generally won’t approve you for a new card if you’ve already signed up. five or more cards in the last 24 months.
Because of such rules, you’ll want to apply for the highest possible Amex card rewards and track your credit claims before applying for a Chase card.
Related: Want to open a new Chase card? Here’s how to calculate your 5/24 position
Key point
Ultimately, choosing a credit card comes down to making a decision based on your individual needs. You should consider a card that offers the most rewards in the biggest spend categories and helps you meet your future travel goals.
Before you register a credit card, it is essential to know your credit score and any card issuer limitations that may affect your ability to be approved or earn your welcome bonus. If you are eligible and Use your new credit card responsiblyit has the potential to be a great tool that can help you build credit while also earning attractive rewards in the form of bonuses.
Additional reporting by Emily Thompson, Stella Shon and Ariana Arghandewal.
