Picking the right credit card for you can be challenging with so many options available. Whether you want to save money on your grocery bills, accumulate rewards for free travel, rack up rewards on business expenses, or fulfill other earning targets, there is a credit card for you.
There are popular credit cards that have existed for a while and new ones that have recently hit the market. However, more options increase the confusion over which card is suitable for you.
Many top credit cards come with attached annual fees. Therefore, to ensure all your cards are worth the expense, you must select the right card for your targets and expenses. The following tips will guide you on how to do that.
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There are many types of cards to choose from. Depending on your credit score, budget, and goal, each type has pros and cons. What are the different types of credit cards available? Most cards are generally classified into the following categories;
Credit-building cards
They are meant for people with a limited credit history or bad credit. If used responsibly, credit-building cards can improve your credit. This means that you can pay your balances on time and keep your credit utilization low. They are also relatively easy to qualify for since they are meant for people with poor credit history. They come in basic types such as;
- Secured credit cards
- Unsecured credit-building cards
- Student cards
It would be best if you used your credit-building card as a means to a better credit card in the future.
Balance transfer credit cards
If you need to pay off debt, balance transfer cards are the best option. A balance transfer card with a lower APR can receive debt transfers from one or more credit cards.
This allows you to save on interest charges and chip away at your balance. For at least the initial several months and sometimes more than a year, these cards offer either low or 0 percent introductory APR on balance transfers.
You can contribute less money towards interest charges and more towards your principal balance during this period. However, since any remaining balance at the end of your introductory period is subject to standard APR, you should ensure you have a payoff plan ready before you begin.
Low-interest credit cards
Work best when you need to finance expenses over time or carry a balance long-term while keeping interest charges at a minimum. They mostly come in two primary forms offering either a 0 percent initial APR on new purchases or an ongoing rate lower than the average APR.
If you have significant expenses coming up and desire to pay them off over time while minimizing interest, a card with promotional APRs on purchase is most sensible for you.
However, you should focus more on the ongoing APR than the introductory rate if you plan to carry a long-term balance. Although credit requirements vary, you will need a good credit score to secure a great ongoing APR.
Rewards credit cards
Rewards credit cards are ideal for people with good-to-excellent credit who want to earn points or cash back through purchases and signup bonuses. Most cash back cards return a percentage of your expenses as a statement credit or direct deposit.
Others earn miles or points that you can redeem for cash back, merchandise, travel, and more. You can also earn signup bonuses after reaching a specific spending target within the first few months.
Picking the right credit card is an important decision. The card you settle on should aid reach your financial targets affordably and efficiently, whether you want to earn rewards, borrow money, or build credit. Always compare the options available before settling on a particular credit card.
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