How to choose the right credit card
Read, 6 minutes
Ever wonder how to find the right credit card, given all the choices? No one size fits all. Your choice depends on your spending habits, financial needs and goals.
Things to consider when choosing a credit card
Your first stop is getting to know the rates and fees common to credit cards. The law requires that this information be clearly displayed in a comparison box or chart in credit card agreements, on credit card sites and in mail promotions. Some numbers to look out for:
Some cards charge a fee every year. Fees vary by the issuer and the additional benefits included with the card.
This is the interest charged on outstanding balances. A single card can have several APRs, depending on the type of transaction—regular purchases, cash advances and balance transfers, for example.
Transactions in another country may carry a service charge, and late or missed payments may generate penalties.
Once you understand the basics, you can begin evaluating different types of credit cards.
Ask yourself:
A good starting point may be a card with no annual fee from the bank where you have your checking account. You may be able to use the card for overdraft protection. And you’ll be able to easily manage and track your finances in one place.
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Low-rate cards
Though the best practice is to pay off your credit card balances every month, that’s not always possible. If you’re likely to carry a balance, it’s worth shopping around for a credit card with a low interest rate. In addition to cards that have a lower-than-average standard rate, many cards offer promotions to attract new customers. Common promotions include:
Cards to help build credit
Certain types of cards can help you build a credit history if you’re just starting out or rebuild your credit if you’ve had a financial setback. As you use the cards responsibly, your good payment history is reported to the major credit bureaus, which improves your credit report and credit score over time.
Rewards cards
Rewards cards allow you to earn cash or points every time you use your card. Rewards are typically 1 percent to 3 percent of the purchase but vary widely by card and even by type of purchase. The cards may have other benefits as well, such as purchase protection. Annual fees range from none to relatively high on some travel cards. Likewise, interest rates tend to be highest on cards with the most rewards and benefits. Common rewards cards include:
Quick tip
Your credit score affects the kind of credit card you can get. A higher score often leads to better rewards and lower interest rates.
Business cards
Credit card FAQ
That depends on how you use the card. There are lots of no-annual-fee cards available, and many offer rewards. But it’s also true that cards with annual fees tend to offer more rewards and perks. If what you earn in rewards is more than the annual fee, then the fee is worth it. Make sure you also consider a card’s additional benefits, which may include things like purchase protection, cellphone insurance, rental car insurance and early access to concert tickets. The value of those perks helps offset the annual fee. This is especially true with co-branded airline cards. Their annual fees tend to be high, but the perks—free checked bag, early boarding, free seat upgrades, access to the airport lounge—can be very important to frequent travelers.
Many credit card issuers load their cards with perks and benefits beyond traditional rewards. Among the most common:
Purchase protection: Replaces purchases that are stolen or damaged
Fraud protection: Limits on your liability for purchases made with a stolen card, if they are reported on time
Extended warranties: Extends the manufacturer's warranty, usually for a year
Cellphone insurance: Replaces a stolen or damaged cellphone, provided you use the credit card to pay the monthly bill
Rental car insurance: Covers your rental car for collision damage or theft
Travel insurance: Covers expenses incurred due to delays, cancellations, lost bags and accidents
Shopping discounts: Provides cash back or discounts at eligible merchants
Free credit scores: Helps you monitor your credit score
There’s no hard and fast rule on how many cards is too many. In fact, most people have multiple cards. The right number for you depends on your finances, lifestyle and goals. Having multiple credit cards can be convenient, allow you to take advantage of rewards and special offers, and, if used responsibly, boost your credit score. On the other hand, as you add cards, managing them can become more difficult. You might be more likely to make late payments, miss payments altogether or accumulate a high level of debt. Any one of these can quickly bring down your score
You may have a basic credit card that you want to upgrade to one with more rewards and benefits. Or maybe you have a premium card with perks you’re not using, so you’d like to downgrade it to something more basic. Either move is easy to make with your current card issuer. In fact, upgrading or downgrading an unwanted card could be better than canceling it, which can hurt your credit score. Call the number on the back of your card and say you’re interested in a product change. The representative will explain what products are available to you and what you need to do to switch. Some issuers let you make the switch online. Usually, you’ll keep your existing account, card number and credit limit.
