“Which credit card is best for me?“. Every day it seems like we get a few new emails asking that exact question. Considering the wide range of credit cards to choose from, selecting the right one can be a confusing process. Each card has different features, benefits, rates, fees and a few other things that you need to consider before making your final decision.
In order to make the right choice, there are a few things you need to know. You need to know the different types of credit cards available, what their features are, and how they are used. In this article, we will look at the main things you need to consider when selecting the right credit card for your needs.
Types of Credit Cards
Before selecting a credit card, you should know about the various types of cards that are available.
Standard credit cards provide basic credit card services and have fewer benefits compared to premium credit cards. With standard credit cards, you also get a lower credit compared to what you would get with a premium credit card.
Premium credit cards are credit cards that offer high credit limits and additional features like purchase protection, emergency services, travel insurance and product warranties.
3. Private Label
Private Label Credit Cards are store-branded cards. This means they can only be used in specific stores. These credit cards are commonly used by wholesale and retail manufacturers.
A Rewards credit card offers you a reward based on the number of purchases you make. There are different types of rewards you can get. These include (but are not limited to), travel, gift cards, and cash.
A secured credit card requires you to make a security deposit normally in cash to activate the credit card. The security deposit becomes the credit line for the account. These are great for those who have poor credit or not credit history. The approval rate is very high and if you use this type of card in a responsible way, you will build your credit score.
Affinity credit cards are used by people who want to support various causes or groups. It can be for sports, charity or even college. Every time you use the card, a contribution is made to the group you wish to support.
Fees, Rates, and Features
It is important to consider the rates and fees of the different credit cards before you make your final decision. It is also important to consider any additional features that you would want your credit card to have (such as travel rewards).
Here are some of the things you need to know about credit card fees, rates, and features.
Annual Percentage Rate (APR)
For every dollar you borrow, your credit card issuer charges interest. When it comes to credit cards, the interest rate is stated as a yearly rate normally referred to as an Annual Percentage Rate (APR). APR is very important because it gives you an idea of how much you will be charged if you do not pay the balance in full every month.
An annual fee is a fee that is automatically charged to your credit card once every year for the benefits you get from the credit card. These are only included in some cards and the fee might range from $1 to $500 depending on the credit card you have. It is important to know if there is an annual fee associated with the card you want and if so, how much it is.
Additional Fees and Penalties
It is also important to know if there are additional charges for certain transactions or any penalties for using the card out of the country.
Warranties, Discounts, Rebates and Rewards
These are very important factors to consider when choosing a credit card. Take time to understand all the limitations associated with different products or stores in the offers and any restrictions related to redeeming rewards.
Security features are very important to have on credit cards. They protect you from identity theft and other fraudulent activities. However, it is advisable to go through all the terms in order to know if you are liable for any fraudulent activities in case they happen.
Making Your Final Decision
Before you get a credit card, it is very important to understand your spending habits. This will not only show you if you are actually ready for a credit card, but it will point you in the right direction when choosing a card. Ask yourself these questions to determine which credit card would be the best for your needs.
How often do I plan on using my credit card?
If you plan on using the credit card for everyday purchases, you might want to consider going with a rewards card. However, if you do not plan to use the credit card often, it would be better to go for a standard credit card because the interest rates are typically much lower and there are no annual fees.
How much of my balance will I pay every month?
Your answer to this question will also make it easy for you to decide which credit card to get. If you plan on carrying the balance from one month to another, it is advisable to go for a credit card that has a low APR.
How often do I travel?
If you are the kind of person who loves traveling, a travel rewards credit card would be a great option for you. You can get a car rental and travel insurance, travel upgrades, air travel, vacations or cruises as rewards.
Will I use the credit card for emergencies only?
If this is the case, you need to choose a credit card that does not include any annual fee and has low interest rates.
Now that you are aware of the different types of credit cards, their features, rates and how to assess your spending habits, it should be much easier to find the best credit card for your needs. However, getting a credit card is a great responsibility. It is important to make sure you are ready for the financial commitment before you get a credit card.