How To Choose A Credit Card

Whether you’re choosing your first credit card or you’re a long-time user of credit, your current credit score and financial profile are what will determine your likelihood of approval when you apply for a new card. The first step is to check your credit score to get an indication of whether you’re in the range of poor, fair, good, very good or excellent credit. You don’t want to apply for a card that’s aimed at those with excellent credit if you aren’t qualified. Once you know where you stand, you can narrow down the cards that you’re most likely to qualify for.

How FICO Defines Credit Scores

Poor	Fair	Good	Very Good	Excellent
<580	580 to 669	670 to 739	740 to 799	800-plus

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There are plenty of reasons to choose a credit card, so understanding what you want out of a new card is key. There’s a big difference between choosing a first credit card, a travel credit card or a balance transfer card and various considerations within each of those categories.

Credit cards primarily fall into one of three types: rewards, which can include cash-back or travel rewards; credit-builder cards, which can be used to establish or build up credit; and intro 0% APR cards, which are used to finance a big purchase or help consolidate debt. Some credit cards may be both rewards cards and come with an intro 0% APR offer, or help build credit and earn rewards, etc. But ideally you should have one of these attributes in mind when choosing a credit card.

Once you’ve done a thorough analysis and determined which card is the right fit for you, all that’s left to do is apply.

As mentioned above, credit cards generally come in three different types: rewards, credit-building and 0% intro APR. But within each category there are other nuances and attributes to consider.

Rewards Credit Cards

Rewards cards are typically one of two varieties: cash-back or rewards, which can mean points, miles or whatever a particular card chooses to call its rewards program.

Cash-back cards hold great appeal for those who like simplicity, as what you see is what you get: Earning 2% back on a $100 purchase is a straightforward $2 back. Some cards may offer higher cash-back rewards in some categories than others, like groceries or gas, while others may earn the same steady rate no matter what you buy. Thinking about your own spending patterns can help you determine which type of cash-back card is likely to yield the highest rewards on those purchases.

But rewards cards can also be worthwhile for those willing to put in the work to understand a particular rewards program. Frequent fliers of a specific airline, for example, may find great value in an airline card that earns miles that can be redeemed for future flights. Those who travel in a variety of ways and aren’t loyal to a particular brand may prefer flexible rewards programs like Chase Ultimate Rewards®, American Express Membership Rewards, Citi ThankYou® Points or Capital One Rewards. The rewards earned in these programs can be used for a variety of redemption types.

Credit-Builder Cards

Credit cards are more than just a convenient way to pay for goods and services; they’re also a powerful tool for building credit. If you’re just starting out or trying to repair damaged credit, choosing the right credit card can help you achieve those goals efficiently.

If you’re enrolled in school, a student card can be an excellent first card choice as these cards are more accessible to those just starting to build credit and may offer rewards and other perks tailored to a student lifestyle. If you’re not a student or you have some credit missteps in your past, a secured card where you pay an upfront security deposit equal to the line of credit you receive can be a good starting point.

0% Intro APR Cards

A 0% intro APR card is one that offers an introductory period of no interest as an incentive to potential new cardholders. Credit card interest rates are relatively high compared to other types of loans and a 0% intro APR card with an offer on new purchases allows you to pay off a big buy slowly without accruing those high finance charges for the length of the promotional offer. If you have existing debt you’d like to pay off at a faster rate, transferring that amount to a balance transfer card can expedite the payoff. By transferring your debt to a card with an intro 0% interest offer, all your payments will go toward knocking out the principal instead of some being siphoned away to pay finance charges.

Annual Fees

Some cards charge an annual fee every year as part of card ownership. These fees can vary from under $100 to upwards of $700 or more. In general, the higher the annual fee, the more perks and benefits that come with the card. Before choosing a card with an annual fee, take the time to look at the benefits like rewards or potential credits to make sure you’ll get your money’s worth.

Interest Rates

A credit card issuer is required to disclose the APR range, along with other rates and fees, when you start the application process. But you won’t know your exact APR until your application is approved, so you won’t know where you’ll land in that range when applying. If you pay your bill in full and on time every month, it won’t matter much as you won’t be paying any interest.

If you typically carry a balance, or even just occasionally do, you may want to prioritize a card with an ongoing low interest rate over other card features. Rewards cards and premium travel cards tend to have higher APRs than other card types, and the value of any rewards and other perks can quickly be negated by any finance charges you accrue.

Welcome Bonuses

Many cards, particularly rewards cards, offer welcome bonuses to incentivize you to sign up for a card and start spending money on it right away. In general, the bigger the offer on a new card, the bigger the minimum spending requirement will be. It’s always nice to get a cash or points bonus, but be careful not to overspend to earn it.

Perks and Benefits

Extras that sometimes come with a card can vary greatly depending on the issuer and the benefits offered on a specific card. Some may include valuable features like airport lounge access, free hotel nights, travel insurance, purchase protection, extended warranty, cellphone insurance and rental car insurance. Premium credit cards that cost several hundred dollars a year or more tend to come with the most perks but even some no-annual-fee cards may include a few money-saving perks.

Depending on your goals, a card’s perks can be the main reason to choose it. If you’re looking to save on checked baggage fees on your preferred airline, for example, then an airline card that offers that perk can be more valuable to you than any other feature.

Credit cards are often a partnership between several parties. For example, a bank like Chase may “issue” or provide a credit card to consumers that runs on the Visa network. There are four major payment networks in the U.S.: Visa, Mastercard, Discover and American Express. Visa and Mastercard are only payment networks and partner with banks and other financial institutions that issue credit cards. Discover and American Express work as both the bank and the issuing financial institution.

This means that a bank like Chase, Citi or Capital One can have some cards issued as Visa cards and some as Mastercard. Discover cards are always on the Discover network and American Express cards are always on the American Express network. In most cases, when choosing the best card for you, the payment network or issuing bank shouldn’t be a major consideration, unless you have some specific reason for it being so.

Credit cards can be powerful tools for building and establishing credit. Choosing the right card for you comes down to identifying your goals with a new card and how it can contribute to your long-term financial goals. If you’re just starting out with credit cards, see our guide for what to know before applying for your first credit card.