Get the Right Credit Card-7 Questions to Ask Before You Apply
Credit cards are useful tools for many things—boosting your credit score, earning rewards points and getting access to keen perks, just to name a few. Take a look at the terms of your primary credit card—does it leave you with rewards you don’t use, unwanted fees and a high interest rate? If so, you may be using the wrong credit card.
Americans love their credit cards—there are 1.06 trillion cards currently in circulation! However, a survey from Experian says that 57% of cardholders say they can’t tell which credit card is the best fit for them.
If that last statistic hits close to home for you, you’re going to want to keep reading! Mountain America Credit Union has seven questions to help you choose a better credit card for you.
- Do you regularly carry a balance on your credit cards?
Credit card users generally can be put into one of two groups when it comes to how they use and pay off their card. On one side are those who want to avoid interest charges, and they do everything they can to pay off their statement balance in full every month. On the other side are those who typically pay less than the full balance and carry a portion from month to month, incurring interest charges.
If you fall into the first group, a good card choice is one that allows you to earn rewards for your spending—typically in the form of travel rewards, cash back or points to purchase products and services of your choice. However, if you plan to carry a balance more often than not, a better plan is to avoid rewards credit cards and look for a card with the lowest rate.
- Do you have credit card debt?
If you’re consistently carrying a balance from month to month on your credit card, a balance transfer credit card may be the best fit. This type of offer allows you to move your high-interest balance from one card to another with a lower interest rate—maybe even as low as 0%! Most of these rates will go up after a specific amount of time, so before you commit, make sure you understand what that time frame is and that you have a plan to pay off your balance before it ends.
As you’re comparing offers, sharpen your math skills and calculate which one saves you the most.
- Do you travel frequently?
If you travel more than just a few times per year and you love perks, using a credit card that pays you back in travel rewards is a great way to leverage your spending. What’s on the table? Use your preferred airline credit card and receive priority boarding, discounts on in-flight purchases, no charge for checked bags and more. Your preferred hotel credit card can boost your loyalty program status and earn you room upgrades, late checkouts or a free breakfast. Check with your favorite carriers to see what their credit card provides.
- Do you want to save for a vacation?
If you’re planning a big vacation in the future, boost the value of your purchases by using a travel rewards credit card. Perks vary from card to card, but typical bonuses include statement credits for travel purchases and transfer options to apply points to various airline loyalty programs. Some travel rewards credit cards are very flexible, allowing you to book with any airline or hotel using any service portal and get a bonus for it. Others only offer a bonus when you use their preferred travel partners.
The best travel rewards credit card choice? The one that offers the most points for the way you spend and for using the travel outlets you prefer.
- Do you make a lot of purchases on your card each month?
If you use your credit card often and can pay off the balance in full every month, your best bet is a credit card that pays the most rewards points and lets you earn points on every purchase—this gives you the most value for your spending, and you don’t have to worry about remembering which purchases will earn points. Other rewards credit cards may offer points on select purchases like gas, dining or groceries. If you choose one of these, make note of which card gives rewards for which purchases, and always use that card when you’re making that type of purchase. It may take some organization, but it can pay off in the end!
- Do you have a small business?
Did you know you can get a rewards credit card for your business, too? Business owners make a lot of purchases for their company, and they should take full advantage of the perks available to them. Enjoy business-specific features like expense category reports, receipt tracking and additional rewards for certain business spending. Additionally, and perhaps most importantly, using a business credit card helps you keep expenses for your business separate from personal expenses, which makes tax time so much easier!
- Is your credit less than stellar?
You’ll typically need a good or excellent credit score to qualify for a credit card. But, if your credit score is not quite there yet, you still have options. Try a secured credit card—all you have to do is submit a refundable security deposit to open your account, then use it like any other credit card. The amount of your deposit is then your credit limit for the credit card. So, if you decide to deposit $1,000, then you have a $1,000 limit—you’re essentially loading your credit card with your own money and then using the credit card to make purchases. You can add more money to your security deposit anytime.
A secured credit card is a great way to establish credit if you have none or improve your credit score if it’s not where you want it to be. At some point, after demonstrating responsible use of a secured credit card, you can apply for a regular, or non-secured, credit card if you want.
In the end, remember to compare your options. It may be easy to choose a financial institution based on proximity to your home or because it’s where your parents do their banking, but it pays to shop around. Here’s a list of what to look for when shopping for a credit card:
- Interest rate
- Annual fees
- The value of each rewards point or mile earned
- Rewards categories
- Foreign transaction fees
- Discounts and offers (including introductory offers)
By the way, just because a credit card has an annual fee doesn’t mean it should be immediately deleted from your list. Estimate how much you’ll need to spend to get the fee waived. If the total is in your normal spending range, keep the card on your short list and compare other features.
Getting the right credit card for you takes a little bit of research, but your budget will thank you!
