With seemingly endless options, picking the right credit card can seem impossible. Spotting differences between cards can be difficult, but the features and fees vary widely. New cardholders need to know what each option offers and be able to determine which works best for their specific financial situation.
Below, we’ve listed some key facts to know about picking the right credit card. From what various companies offer their customers, typical fees and rates to expect, and important considerations, you’ll know exactly what to look for when searching for a new credit card.
Types of cards
Cards are explicitly tailored to customer lifestyles and can provide valuable rewards depending on spending habits. Here are the most common card types and what they offer.
Standard credit — Standard credit cards are perfect for people who don’t want complicated rewards programs and simply need extra spending power from time to time. These basic options won’t offer any cashback or points, have low or nonexistent annual fees, and are best for people who limit credit spending as much as possible.
Rewards cards — The most popular group, rewards cards will earn you cashback or points on some or all purchases made. Travel cards will build points for airline miles, hotel stays and rental card credits. Cashback can lower your monthly payment by reimbursing you for everyday essentials such as groceries and gas. Check card offers for specifics on rewards.
Interest rates and fees
Much like rewards programs, fees and interest rates vary widely from company to company. The average annual percentage rate for credit cards is close to 16% — this incentivizes making your full payments each month. A good credit score can keep your rate lower, but read the fine print closely, as many cards can charge 25% or more.
It’s essential to keep a close eye on fees. While most options are “free” to use, some cards require a yearly fee as part of your service, typically ranging between $50 and $250. If you can afford these yearly dues, benefits such as identity protection and fraud monitoring are usually included. Be sure to thoroughly read your customer agreement for any annual costs or maintenance fees associated with use.
Choosing the right credit card
Get your credit score — Knowing your score going in can help you know what you qualify for and help eliminate unnecessary applications. When companies check your score, you’ll lose some points for the inquiry, so only apply for cards you know you want — this will help keep your score up and make the process faster.
Compare and contrast — Once you’ve decided the type of card you want, it’s time to focus on the details. If you’re after a rewards card with a low annual fee, you’ll want to compare all cards you qualify for against each other. Only you can decide what’s most important. If you value more cashback on purchases over a slightly higher annual fee, find the card with the most money return based on your spending. Those extra dollars on the yearly fee might come back to you in just a few months of spending.
It’s crucial to spend within your means and try to clear your balance each month to avoid high-interest payments. Despite these potential problems, credit is an invaluable tool to reaching financial goals. Credit cards are helpful in times of emergency, make large purchases more manageable, and with proper use, can improve credit and increase purchasing power. With these tips in mind, you’ll be able to find the perfect card for you and start getting bonuses on your everyday spending.
Finances FYI is presented by 1st Security Bank.
At 1st Security Bank of Washington, we take a customized and personal approach to your financial well-being. We live in the communities we serve, so our branches offer tailored solutions to their communities. We believe relationships make the difference, and that sets 1st Security Bank apart.