How to Choose A Credit Card Wisely

on Credit Card

How to Choose A Credit Card Wisely

Choosing a new card is something we seldom do, as many of us still carry around our very first cards – possibly even the ones we’ve had since college. And this is for good reason: Applying for a new card involves a hard credit report inquiry, which can impact your score. Not to mention, opening more accounts than you need can increase the risk of overspending, security threats, and frankly, the financial stress that comes from managing too many lingering payments.

Nonetheless, there may be times in your life that warrant opening a new credit account. While it’s not enormously complicated (in fact, it is almost concerningly simple to open a new credit card), these tips will help you select a card that is best suited to your own creditworthiness, spending habits, and financial goals.

Check Your Credit

The very best credit cards require a sold credit history, so if you’ve had credit issues in the past, these may not be viable options for you. This may also apply if you have not had a very long credit history, for instance, if you’ve only recently opened your first credit account.

In these cases, you may not have access to the very best rewards or fees. Start with a simple card without many bells and whistles, keep your charges very small, and make your payments: Over time, you will eventually be able to apply for a card that carries greater rewards and smaller annual fees.

Evaluate Your Payment History

Do you consistently pay your statements each month? Or, do you occasionally (or frequently) carry a balance?

If the latter, consider APRs first, then rewards. This matters because no matter how enticing rewards may be, you will likely save more money by selecting a card with a lower interest rate – even if it does not offer rewards. If possible, select a card with a 0% introductory interest rate, and aim to repay the balance before the introductory rate expires. That way, you will not pay any interest.

If you only occasionally carry a balance (or if you never do), take a look at your reward options to see if you might qualify for a sign-up bonus or other monetary incentives.

Consider How You Spend Your Money

If you spend a substantial amount of money in a particular area, a specialized card may make sense for you. For instance, if you frequently travel for work and use a certain airline, you may want to take advantage of the benefits of using that airline’s credit cards, like free checked bags or priority boarding.

Separate Your Business Expenses

If you regularly accrue business-related expenses such as equipment, conferences, meals out, or other items related to your trade, consider opening a separate card dedicated to your business purchases. Not only will this help you keep your finances clean, organized, and separated, but it can work in your favor in the event of a tax audit or legal action against you.

Many business credit cards come with features designed to help you track your business expenses. They also offer rewards for those with strong credit. In selecting a business credit card, consider what features, if any, would help you streamline the way you run your business. Also, evaluate the rewards offered and compare them against personal credit cards to see which will benefit you most in the long term.

Additional Considerations

If your credit is weak, don’t worry: here are a few concluding tips to help you choose your credit account wisely.

  • Choose the lowest APR you can find.
  • Don’t be easily seduced by rewards. Weigh the rewards against the APR, annual fees, and other items. 
  • Put your application on hold until your credit approves. Applying for – and being declined by – multiple credit companies will harm your credit even more.

The credit card you select is unlikely to make or break your financial situation. Nonetheless, weigh your options before applying for a card, and make your choice according to your spending habits and financial goals.