1. What’s my credit score?
If you already know your FICO credit score, you’ve taken an important first step toward finding the credit card that’s right for you. For most issuers, your credit score is a major factor in determining whether or not you’ll get approved for a particular card. It also influences the interest rate you’ll be charged.
In general, credit card issuers use the following score ranges to sort applicants: Below 630 – Bad credit 630-689 – Fair credit 690-719 – Good credit 720-850 – Excellent credit
The higher your credit score, the more credit card options you’ll have. People with excellent credit will be able to qualify for any card on the market, including some of the highly sought-after premium cards. Those with good credit will also have a wide range of choices.
If your credit score falls into the bad or fair range, you’ll have more trouble getting approved for a credit card, but it’s certainly worth the effort – using a credit card responsibly is a great way to build credit. An unsecured credit card might not be a possibility right now, but there are other options. See the information below for more details about what to do if you’re new to credit or are trying to rebuild your score after a financial hardship.
If you don’t know your credit score, you should contact all three of the major credit bureaus – Experian, Equifax and Transunion – and order a copy of it. This will cost you a few bucks, but you’ll be getting your true-blue FICO score, which is the score most commonly used by lenders and credit card issuers in the United States. Most of the free credit score sites out there today offer a non-FICO score, so going through the bureaus is your best bet for reliable information.
2. Do I need a balance transfer credit card?
If you are carrying a balance on your credit card, a 0% or balance transfer credit card might be for you. If you have good credit and can qualify for one of these cards, moving your high-interest debt to a card that charges no interest for a period of time will save you big bucks on finance charges and help you pay off your balance faster.
There are a few things to keep in mind before applying for a balance transfer credit card, though. For one thing, most 0% cards charge a balance transfer fee. This is usually 3% of the total balance you’re moving onto the card, although there is at least one card out there that waives this fee under certain conditions.
For many folks, paying a balance transfer fee is worthwhile because it’s outweighed by what they’ll save in interest. Just be sure to factor it into your calculations as you decide whether or not a balance transfer is right for you.
Nerd note: You don’t have to figure this out on your own! Use our handy tool to find the real cost of your balance transfer.
Another consideration: your payment habits. It’s very important to make on-time bill payments when you’re on a 0% promotion. If you don’t, there’s a high likelihood that your 0% deal will be canceled and you’ll have to start paying interest right away. This could be very costly in the long run, especially after paying a balance transfer fee.
Finally, remember that 0% periods don’t last forever. You’ll need to keep track of when you got the card and when the promotion ends – your issuer isn’t required to notify you of when interest will start accruing on your balance. Make it a priority to pay off your debt before the end of your 0% promotion to make the most of your balance transfer.
3. Should I get a travel credit card?
If you travel a lot, a travel rewards credit card might be a good choice. With this type of card, you’ll earn points or miles toward your next trip every time you swipe. Plus, many of these cards also offer cool travel perks, like a free checked bag, priority boarding, or late hotel checkout.
Travel credit cards typically fall into three categories: general, rewards platform, and co-brand.
With a general travel credit card, you’ll earn points or miles every time you swipe. But these aren’t tied to any specific frequent-flyer, currency or rewards program – when it comes time to redeem, you’ll book your plane ticket, cruise, hotel stay, etc. with the card however you normally would, then pay yourself back with your points or miles in the form of a statement credit.
These cards are usually better for budget travelers, or those who feel overwhelmed by the complexity of frequent-flyer programs. Also, you won’t have to worry about sticking to one airline or hotel chain with a general travel credit card – you can book with whichever provides the best deal and still use your rewards.
Rewards platform travel cards work a little differently. With this type of card, you’ll earn points that can be used to book travel through the issuer’s online platform or portal. One example of this is the Ultimate Rewards portal operated by Chase. You’ll dip right into your rewards account to book a plane ticket, a hotel stay, vacation package – whatever the particular platform allows.
In many cases, these cards also allow you to transfer your points to participating partners. So, if you wanted to, you could arrange your hotel stay using the platform with some of your points, then transfer other points to a frequent-flyer program you like to book your flight. These cards are best for folks who value this feature.
Last but not least, co-brand travel credit cards (also known as affinity cards) are tied to the frequent-traveler program of a particular airline, hotel chain or discount travel site. You’ll earn the rewards currency of one of these programs every time you use the card, as opposed to general points or miles. These cards are best for people who are very loyal to a particular airline or hotel chain – for example, if you live near a hub for a major airline and therefore use it nearly every time you fly, its co-branded card might be a good option.
Alternatively, if you’re very skilled at wringing a lot of value out of frequent-flyer miles, a co-branded card could allow you to fly or stay for free more often than you would with a general travel card.
In either case, if you frequently travel internationally, be sure to pick a credit card that charges no foreign transaction fee and comes with an EMV chip. This will keep costs down and ensure wider acceptance when you use your card overseas.
4. Do I prefer a rewards program that’s easy to manage?
If you answered yes to this question, you might be a good candidate for a cash-back credit card. Contrary to popular belief, there are lots of good cash-back cards on the market, many of which offer a high rewards rate and require minimal effort to manage.
In general, cash-back credit cards come in two flavors. One flavor offers 5% cash back in rotating quarterly bonus categories and 1% cash back on all other purchases. This type of cash-back card is good for people whose spending aligns with the bonus categories it features and will remember to sign on to the new 5% categories every quarter.
If managing bonus categories sounds like a hassle, a flat rate cash back credit card might be for you. These cards provide a high, flat rewards rate, generally between 1% and 2%. There is usually no spending cap and no opt-in requirement with this type of card.
Nerd Note: If you want help understanding which cash back card will give you the best rewards based on your spending habits, check out our cash back rewards calculator. Click the green icon with the “$” sign to adjust what you spend by category to see what your rewards could be for these cards.
Most cash-back cards don’t charge an annual fee, and some even provide a small signup bonus. Again, this is the ideal type of card for someone who doesn’t want to spend a lot of time or energy overseeing his or her rewards program.
5. What if I’m interested in maximizing credit card rewards, even if it means figuring out a complex program?
A card with a more lucrative rewards program might be in your future. You’ll need to invest some time in learning the ins and outs of how to maximize your card’s earning potential and how to redeem to get the best value out of each point. But if you think this represents a fun challenge, the payoff is that you’ll make swift progress toward your next vacation, gift card or merchandise redemption with every swipe.
The right card for you is probably one that offers points that can be redeemed across multiple categories. For example, if you choose an American Express card that earns Membership Rewards points, you can use them for:
- Gift cards
- Purchases made at Amazon (with certain cards)
- Travel booked through American Express using Pay with Points
- Travel booked by transferring points to partners
It will require some research and trial-and-error to figure out which redemption option will yield the highest value per point. If you find this satisfying, a card that offers this type of rewards structure will be a good fit.
6. Should I get a student credit card?
If you are a college student, there’s a whole category of credit card devoted to your needs. As their name implies, student cards are meant for college kids just getting started with using credit. They generally come with low limits and lower-than-average interest rates (you won’t qualify for a high limit credit card without a very strong credit history). Also, most don’t charge an annual fee, and some even come with a rewards program and a modest signup bonus.
Although you might be worried about the possibility of getting into debt, it’s a smart idea to get a student card as soon as you can. Using it responsibly (which means paying your bill on time and in full) is a great way to start building a good credit score. A stellar score will make it easier to rent your first apartment, qualify for a car loan, and, someday, get a mortgage. This is definitely something you want to take seriously.
However, it’s also important to remember that, as a result of the CARD Act of 2009, you’ll probably need a cosigner to get a student card. Unless you make a substantial income, credit card issuers will require a cosigner in order to approve your application if you’re under 21. If you can’t find someone with good credit to back your play, you might have to hold off on getting a card until you’re a little older.
7. Am I trying to rebuild my credit after a financial hardship?
If you answered yes to this question, you should know that turning to credit cards to rebuild your credit score after a serious financial hardship is a savvy move. Although it will take time, using a credit card responsibly is an easy way to start regaining ground you’ve lost with your credit history.
The trouble is that qualifying for a card immediately after you’ve been through an event that does serious damage to your credit, like a foreclosure or a bankruptcy, can be tough. You probably won’t be able to get a card on your own, but you could apply for a new card with a cosigner. Alternatively, you could become an authorized user on someone else’s card. Both of these strategies rely on recruiting a loved one to help you out, but they’re good options to consider.
If getting a cosigner or becoming an authorized user isn’t possible, another idea is applying for a secured credit card. Secured credit cards work a little differently than “regular” or unsecured cards, at least on the front end: They require you to put down an up-front deposit, usually the same amount as your credit line. So, if you’re looking for a credit line of $2,000, you’ll need to put down a $2,000 deposit. This is money the issuer can draw on if you default, so in this sense it “secures” your credit line.
But besides putting down the deposit, a secured card functions the same way as an unsecured card – you’ll have to manage your spending and pay your bill on time and in full every month. Since you’re tapping a credit line when you use the card, you’re taking steps to rebuild your credit by choosing this option over a debit card or a prepaid card.
Plus, if you manage your secured card responsibly, your issuer will likely upgrade you to an unsecured card after a year or so. This will go even further toward restoring your score to its former glory.
8. Am I completely new to credit?
If you answered yes to this question, you’re in a special position when it comes to finding a credit card. It’s a bit of a catch-22, but if you’ve never had credit before, it might be a little tough to qualify for your first card. Don’t worry, though – there are ways to overcome this.
One option is to ask a loved one to serve as the cosigner on your first card. In this arrangement, you’ll have total control over the account and will be responsible for making payments, managing rewards, etc. But if you fall behind on your payments for some reason, the cosigner will be required by the credit card issuer to step in and cough up whatever you owe. Otherwise, his or her credit will suffer.
If you can’t convince someone to cosign your card, another route to take is asking to become the authorized user on a loved one’s card. In this scenario, you’ll be issued your own card and will be able to make purchases with it, you just won’t be responsible for making payments. This might not sound like a good deal for the primary cardholder, but for a lot of folks, this is preferable to cosigning.
This is because the primary cardholder maintains a lot more control over the account – he or she can go online anytime to see how much the authorized user is charging, if a payment has been made, etc. The primary cardholder can also easily terminate the authorized user at any time if the arrangement isn’t working out.
But if you’re not in a position to get a cosigner or become someone else’s authorized user, there are still cards you can probably qualify for. While a secured card is one option (see “Am I trying to rebuild my credit after a financial hardship?” for more information about secured cards), there are also a few unsecured cards out there for people with a limited credit history.
You’ll have to do a little thinking about your lifestyle to decide which of these options is best for you, but for the sake of your score, getting a credit card as soon as you can should be a top priority.
9. Is there a particular category where I spend a lot of money?
If you answered yes to this question, you might be a good candidate for a rewards card that earns big points, miles or cash back on certain types of spending.
But there’s a little nuance to untangle here. First, do you tend to spend a lot in particular categories at certain times every year? If so, you might benefit most from a rotating 5% cash-back card (see “Do I prefer a rewards program that’s easy to manage?” for more details about this type of card). Most choose their featured 5% retailers based on seasonal activities, so there’s the potential to get a lot of value out of these cards if your heavy spending categories change throughout the year.
If, on the other hand, you consistently spend a lot in a particular category, such as groceries, entertainment or dining out, you should prioritize cards that give primo rewards on that type of swiping. It might be worthwhile to comb through some old credit card statements to see if one type of retailer jumps out as dominating the bulk of your spending. This should help point you in the right direction as you search for a card.
10. Am I comfortable with paying an annual fee?
If you answered no to this question, never fear – there are lots of great cash-back cards on the market these days that offer a solid rewards rate and no annual fee. In other words, you don’t have to worry that you’re missing out on all the best cards by eschewing those that carry an annual fee.
However, it never hurts to stop and do a little math. In some cases, paying an annual fee might be worth it if you’re going to score a higher rewards rate and/or a higher signup bonus with a particular card.
Here’s some Nerd math - let’s say you typically spend about $10,000 per year on your credit card. If Card A provides a rewards rate of 1% at no annual fee and Card B provides a rewards rate of 2% and charges a $75 annual fee, you’re actually better off going with Card B. You’ll net $125 in rewards with Card B when both the rewards rate and annual fee are accounted for, and only $100 with Card A. In case you’re curious, here’s the math:
Card A: $10,000 (annual spend) x .01 (rewards rate) = $100 earned annually
Card B: $10,000 (annual spend) x .02 (rewards rate) = $200 earned annually - $75 annual fee = $125 net rewards
And that’s only looking at the rewards rate – it’s also likely that you’ll get a much higher signup bonus with Card B, too.
All this is to say that annual fees aren’t a waste of money for everyone. Think critically about this as you compare the cards you’re interested in.
11. Am I concerned about interest rate?
If you answered yes to this question, it’s time to take a step back and figure out why. On the one hand, some people use credit cards to finance one big purchase that they don’t have the cash on hand for. In this case, looking for a card that offers a long 0% purchase APR is a good idea.
For instance, let’s say you want to buy an engagement ring for your sweetie. If you dropped the ball on saving up for it, getting a card that offers a 0% introductory interest rate for 12, 15 or even 18 months will give you a decent amount of time to pay off the purchase before finance charges start building up.
On the other hand, if you’re concerned about a credit card’s interest rate because you typically revolve a balance from month to month, it’s time to reevaluate your spending habits. Credit cards are a tool for making purchases, building credit and earning rewards – not extra income.
It should be a top priority to pay off your balance in full every month; if you do so, the interest rate on your credit card doesn’t matter because you’ll never pay it. To ensure that you’re not spending more than you can afford to pay off by your billing due date, follow these tips:
- Make a budget and track your spending; only put charges on your card that fit into your spending plan.
- Use your online account to check your balance every couple of days.
- Sign up for balance alerts from your issuer so that you’ll get a text or email if you’re approaching your spending limit for the month.
12. Am I considering debit or a prepaid card instead of a credit card?
If you answered yes to this question, you’re exploring all your options – and that’s a good thing. To summarize how each type of card works, it’s helpful to think about how/when you’re paying for your items:
- With prepaid debit, you’re paying before you swipe.
- With debit, you’re paying when you swipe.
- With credit, you’re paying after you swipe.
A big reason that a lot of folks gravitate to debit (regular and prepaid) is that they’re nervous about paying for their items after they’ve made the purchase – meaning, when the bill comes at the end of the month. Many worry they’ll overspend and get into debt.
Although you do need to be vigilant about avoiding debt when you use a credit card, you’re also getting a lot of great benefits that debit doesn’t provide. In general, you’ll enjoy greater security, fewer fees (in the case of prepaid debit) and rewards. Most debit cards just don’t stack up on these metrics.
But the biggest benefit to using credit over debit is that you’ll have the opportunity to build your credit score. Since neither prepaid nor regular debit cards involve using a line of credit, using these cards will have no impact on your credit score.
On the other hand, if you pay your credit card bill on time and in full every month, you’ll be taking an important step toward creating a solid credit profile. This will make a lot of other aspects of your financial life easier in the future, including purchasing a car and a home, so it’s certainly something to consider.
If you do decide to go the prepaid debit route, be very careful about fees. Many of these products charge fees that could add up to hundreds of dollars on an annual basis, so be sure to check out our tool to find a transparent, low-cost card that fits your lifestyle.