Credit cards a great financial tool that most adult Americans use every day. They can be very attractive when you first apply and start using them, but if you don’t do your homework and choose a credit card carefully, you can end up in a complicated situation later. So how should you go about choosing the best credit card?
Find out your credit score
The first step to choosing the right credit card is to find out what your credit score is and assess how likely you are to get approved for a credit card. You can use any one of the three main credit bureaus to check your score for free. If you have a relatively good score of 600 or above, you can then go on to reading about different types of credit cards so you can choose one to apply for. If your credit score is poor, for example, between 500 and 599, or if you don’t really have any credit in the first place, you can still apply and get approved for a traditional credit card, but you will probably have to face monthly credit card fees and huge interest rates of over 30 percent. In addition, you probably won’t get any perks or rewards from these credit cards, so if you want to use a credit card but don’t expect to be able to pay off your entire bill each month, you should probably find a different option for borrowing money or get a secured credit card that will help you build credit.
What types of credit cards are there?
If you have good enough credit to get approved for a traditional credit card, you should definitely apply for one and use it consistently to further improve your credit score. There are several types of credit cards you should consider:
Regular unsecured credit cards
These standard credit cards are pretty simple in terms of their conditions: you get a credit card and use it to make purchases. When the bill arrives every month, you pay off the minimum amount and pay the rest later. You should pay attention to your credit limit, APR and the annual fee for using the credit card. Also, keep in mind that some credit card providers will waive the fee and APRs for the first year to entice you to become a client.
Gold and platinum credit cards
These seemingly higher-end credit cards have both some advantages and disadvantages. They usually offer higher credit limits, so you can spend more before you have to pay back the money, more perks for being a client, but at the same time they have higher annual fees, so make sure that the advantages outweigh disadvantages. These credit cards also often require you to have a higher credit score.
Rewards credit cards
Rewards credit cards often offer cash backs on shopping or airline miles, so they can give a little boost to your finances if you shop or travel a lot. However, be mindful of the terms and conditions on these credit cards, as sometimes you can think that you’re getting rewards when, in fact, there isn’t really a way for you to use them.
Business credit cards
If you have a small business or if you’re a freelancer, you can apply for a business credit card, which will likely have a higher credit limit and offer business-related rewards that you can use to save on some expenses. The potential downside of these credit cards is that they affect your business and personal credit score, so you should use them responsibly.