Analysis paralysis: It’s more than just an obnoxious little rhyme. It’s the thing standing in between you and the credit card of your dreams.
There are dozens and dozens of credit cards to choose from. If you’re asking, “What credit card should I get?” we have the perfect checklist for you. Use this post as a questionnaire and you’ll be united with your new plastic companion before you know it.
Which credit card is best for me?
There will never be a one-size-fits-all credit card, as each has wildly different value propositions based entirely on your lifestyle. A card that saves one person thousands of dollars per year may be virtually useless to someone else.
To find your perfect credit card, follow these four steps.
1. Check your credit score
Checking your credit score as a first step to choosing a credit card is critical for a couple of reasons.
First, you don’t want to apply for a card that’s simply out of your league. “[Y]our credit score…is a number that helps show how well you manage your financial obligations,” says Jason Gaughan, head of consumer credit card products at Bank of America. “Make sure your credit score and credit history align with the requirements [of the credit card you want] before signing up to avoid hurting your credit score [for no reason].” Knowing your credit score will quickly narrow your search.
It will also give you a clue as to what interest rates you can expect. Credit cards often provide a wide range of APR–the low end is reserved for those with the best credit, and the high end for those with the worst credit. If you’ve got an excellent credit score in the 800s, you should be able to reasonably anticipate your card’s terms.
2. Whittle down your card options
Before your search begins, decide which of the following describes your financial goals.
Establish or rebuild your credit
Whether you’re just dipping your toe into the wonderful world of credit or atoning for your previous credit-related sins, there’s a credit card to help you build a strong credit profile.
There are myriad credit cards designed for those with bad credit. They’ve often got borderline predatory interest rates, high annual fees, and virtually no benefits to speak of. But they do one thing well: they report to the credit bureaus to help you create a positive track record.
If you can float the money, secured credit cards can be a better way to build credit. By making a refundable security deposit to the card issuer (usually between $200 and $5,000), you can receive a credit line in the amount of your deposit. Many offer rewards for spending, various complimentary subscriptions, and even annual statement credits.
And if you’re a student, you’ve got plenty of options–some of which require no credit history whatsoever to be approved.
Transfer a balance
So you’ve currently got a credit card (or other loan) for which you’re paying out the nose in interest charges? You can get a breather from all the fees by opening a balance transfer credit card that offers 0% intro APR for a lengthy period of time. Some cards, such as the Citi Simplicity® Card, offer 0% APR on balance transfer for an incredible 21 months.
Earn cash back
If your goal is to simply discount your everyday purchases, you’re likely in the market for a cash back credit card. These cards work as a sort of rebate. Some cards offer bonus cash back for specific spending categories, while others offer a flat rate for everything.
For example, the Blue Cash Preferred® Card from American Express earns 6% back at supermarkets (on up to $6,000 in spending per calendar year, then 1%). For those that spend $500 per month on groceries, this card is a great option. Meanwhile, the Wells Fargo Active Cash® Card earns 2% cash back on all purchases–ideal for someone whose spending doesn’t fall into a common bonus category.
Earn travel perks
More than any other credit card category, travel rewards credit cards offer the most value from ongoing benefits like statement credits, elite status-like perks, memberships, and travel insurance. Not to mention, the cards collect rewards that can often be exponentially more valuable than cash back–if you know the best ways to use them.
If you’re a frequent traveler–or even if you board a plane just once or twice per year to visit family a few states away–a travel credit card could save you many hundreds of dollars per year from benefits like free checked bags, reimbursements for airline incidentals, and airport lounge access.
Score business benefits
Whether you’ve got an s corporation with dozens of employees or a simple for-profit side-gig like driving for Uber, you qualify for a small business credit card. These cards are critical for keeping your personal and business expenses separate–a big deal when tax season rolls around. Plus, they often come with bonus categories that align with common business expenses (office supply stores, shipping, internet, and more).
It’s also worth mentioning that these cards offer some of the largest welcome bonuses on the market.
3. Read the fine print
Don’t grab the first credit card you see that’s covered in glitter and sequins. There’s always a fair bit of mice type to examine before you formally submit your application, such as APR, annual fees, and more.
A credit card’s annual fee is less consequential than you might think. Is it infuriating to pay a fee each year just for the privilege of holding a specific credit card? No doubt. But all you’ve got to do is perform some quick and straightforward arithmetic to decide if an annual fee is worth it.
“Some credit cards do charge annual fees, and if [the cash back that you earn each year] doesn’t equal that, then you might as well find a card with no cash back that’s free because it’s of the same benefit,” says Leslie Tayne, founder and head attorney at Tayne Law Group. All that to say, if you organically save (or earn) more than you pay for the annual fee, the credit card is worth it.
Credit cards are known to publish various promotions surrounding things like welcome bonuses and 0% APR. A crude Google search of the card you’re interested in should be able to tell you if you’re getting the best deal or if you should wait a month or two when a superior offer will likely emerge.
Credit cards advertise a wide range of potential interest rates on their application pages. It’s worth noting them in case you ever find yourself in a situation where you’ve got to carry a balance.
Also be aware of the specific type of interest the card charges. One thing to watch out for is “deferred interest,” which sometimes crops up for 0% APR offers. Deferred interest effectively delays all interest payments until the end of the 0% APR window. If you haven’t paid your balance in full, you will be retroactively charged all the interest that was previously waived. In other words, failure to pay on time can result in a lump fee amounting to hundreds of dollars.
How rewards work
Just because a credit card’s rewards currency is marketed as super valuable doesn’t mean you’ll be able to achieve the same value. Some rewards are more complicated to redeem than others.
For example, if you earn cash back, you can (usually) easily redeem it as a statement credit on your credit card, a direct deposit into your bank account, or as a check mailed to your home. But hotel points may only be used for specific hotels during specific dates.
4. Apply for the card that best meets your needs
By now, you’ve likely narrowed your future credit card down to a handful of options. Remember–you don’t necessarily have to choose just one.
If nothing else, you’ve identified the category of credit card that will best suit you–whether it’s cash back, free travel, 0% APR, or a simple credit-building tool. You should now be comparing things like welcome bonuses, bonus spending categories, and APR. You may even check to see if you pre-qualify for a few of your top choices.
When you go to apply, be ready to enter the following information:
- Full name
- Mailing address
- Date of birth
- Social Security number
- Annual household income
You may also need to reveal whether you rent or own your home and your monthly housing payments.
If you’re applying for a small business credit card, you’ll have to enter details such as your business name and structure, your current annual revenue, the age of your business, and your number of employees. You’ll also have the option to enter your Employee Identification Number (EIN) which can help you build business credit.
Finding the perfect credit card for your situation takes a fair bit of soul-searching. But by starting with a quick glance at your credit score, you’ll get an idea of which credit cards you can qualify for. You can then focus on your financial and lifestyle goals: Do you want to travel? Do you want cash back? Are you trying to bolster your low/nonexistent credit history?
When you’ve pared down your preferences to just a few cards, you can start comparing things like welcome bonuses and interest rates. After all, your application will ideally end in a long and happy relationship for years to come–long after the card’s intro offer has been spent.