Before you settle for a credit card, it is important that you understand your options and ask questions. Top on the list of factors to consider when you are about to get a credit card is your spending habits and financial goals & aspirations.
The credit card is not meant to just occupy space or beautify your wallet. You applied for it to serve some premeditated financial purposes. These purposes are usually determined by your attitude towards spending, the level of your financial responsibilities as well as your short and long-term goals and aspirations.
As easy as it may sound, picking the perfect credit card for your needs is no walk in the park. A lot of conscious effort needs to be invested into it. You need to gather as much information as you can get and weigh your options before settling for any. The fact that you have multiple options available to you can make the attempt a more confusing one. But not to worry, you can still get the perfect credit card(s) for your needs.
If you are currently struggling with your bills, getting a new credit card may not be the best move for you. Rather, you may want to consider doing all you can to manage your debt rate and have it under control.
Getting the best credit card for you can save you money in the form of interest, earn you rewards from the issuers and increase the acceptance rate of your future applications for more credit cards and other forms of borrowings.
Steps to take to choose the perfect credit card for your needs
1. Check your credit score
Without knowing your credit score, it may be difficult to outrightly identify the best credit card offer for you. When you check your credit score and now your position, you can then compare what the different credit card issuers offer. That is when you can decide on which offer would not harm your credit score.
Some credit card offers may sound juicy, but they do not align with your current financial reality as confirmed by your credit score. It is therefore great that you give this a consideration so as not to end up setting yourself up for financial embarrassment.
If upon finding out about your credit score and it is not what you expected, you can check your credit history/report for a better understanding of the situation. Then, you can strategize on how to improve on it.
Checking your credit score before going ahead with your credit card application is being proactive as the same will determine the issuer’s decision of granting or rejecting your application. Therefore, it is better that you have all loopholes sealed before submitting your application for review and approval or disapproval as the case may be.
2. Identify the type of credit card that you need
There are majorly 3 types of credit cards. They are;
- Those that help you improve a poor credit
- Those that help you save money on interest and
- Those that earn you rewards.
From the types of cards mentioned above, the best one for you is one whose features align with your needs. For example, if you are not the type that travels a lot, then the best travel card ever will be useless in your hands. This is because it is not meant for you. The features do not align with your needs.
Ø Credit improving cards
Students or secured cards are the best for you if you are looking at building up your credit. Student credit cards and other unsecured credit cards that are designed to serve college students and other individuals who are new to the credit industry are great to build credits. They are also easier to qualify for compared to other forms of credit cards.
So, are some secured credit cards that require a minimum deposit of $200 as security. This security deposit is refunded to you after upgrading the account or closed upon certifying all the necessary requirements.
Ø Interest saving credit cards or balance transfer cards
There are credit cards that charge 0% Annual Percentage Rate (APR) at the beginning and subsequently charge at a low-interest rate. Try negotiating for them.
This type of card may be the best bet for you if you intend to use the credit card for emergencies, or whenever your income is irregular.
Balance transfer offers can also help you to pay off your high-interest debts without interest. However, you must understand that these offers can only be visible to you if you have a great credit score. An average or poor credit score may serve as a stumbling block to getting this.
Ø Credit cards that earn you rewards, trips or cashback
If you are the type that does not default in your monthly repayment plan and never incur interest, then this card is good for you. This is because they reward you with bonuses or points, miles and in some cases, cashback on every spending traceable to the credit card.
However, you must note that these types of cards usually attract higher Annual Percentage Rates (APRs).
3. Work out what percentage of the debt you can pay-off monthly
This can help you get the best available credit card for you. Different credit cards offer different credit-free days. The credit-free days are the period within a month when you are not charged any interest rate while making a repayment. You may want to settle for that which offer more of this. Such cards may charge high-interest rates and annual fees, but your ability to meet up with the deadline will place you on the advantage.
4. Stick to a credit limit that you can afford
Even though the credit card issuing firm will offer you a credit limit, you are not mandated to take everything offered if you are worried that you’ll overspend or struggle with paying back.
This is why your spending habit has a vital role to play in your credit card application process. If you get carried away and take more than you actually need and can afford to pay back, you might just be setting yourself up for a financially messy situation in the future.
5. Compare credit cards
As you search for the best credit card for you, do not limit your search to a credit bureau of a few. Compare the same product from different firms. Identify what differences and similarities are on these cards from one issuer to the other.
When you compare credit cards, you can put factors like interest rates, interest-free days, annual/monthly fees, rewards and other features into consideration.
6. Direct your questions to the right channels
There are online resources and financial advisors that are reachable to provide answers to your questions. You can approach them. Even representatives of credit card issuing firms.
That way, you can filter and narrow your questions to your needs to get a one-on-one response from them and make your decisions. Some of the direct questions that you can ask are;
- Will the card help you build your credit? You need to settle for a card that sends your credit reports to the 3 leading credit bureaus (Experian, Equifax and TransUnion). Many secured cards fail to do this.
- What is the cost of opening a credit account plus the annual fee and other charges?
- Is it possible to be upgraded to a higher credit card in the future? It is advisable to go for cards that allow you to build credit and allows you to upgrade to enjoy more competitive terms in the future.
- How long is the 0% APR period and what is the subsequent APR? the longer you can repay your debt at an interest-fee rate, the better for you. Also, look out for credit cards that allow you to pay subsequently at a relatively low-interest rate.
- What is the balance transfer policy on the card? If you have plans to transfer the balance in the card, ask for the transfer fees and other policies that affect such a transaction.
- Are there rewards on the card? Be sure to get clarifications on the existence or not of any form of rewards on the card.
These are just a few of the numerous questions that you can ask before settling for a credit card.
7. Settle for the credit card that offers you the best value
This is the idea behind embarking on all these investigations. The aim is to get the best value available for you. This is why you need to compare offers before settling for any.
Before you pitch your tent to a credit card issuer, you must have ensured all due diligence and confirm that you are satisfied with the terms and conditions surrounding the card. You also must have confirmed that they align with your financial capabilities and goals.
You must have also mapped out strategies to repay the debts at the agreed time so as not to negatively affect your credit score.
Ways to use your credit cards wisely
After approving your credit card application, the issuer will not tell you what to do with the credit or how to go about using it. What they are interested in is your repayment of the principal and interest. Here are some of the ways that you can maximise your credit card(s).
One-time use and refund
Some people applied for a credit card to fund a big purchase and begin to pay back monthly. They do not intend to continue using the card after that one-time use.
On the other hand, some customers do this big purchase with a credit card, rake in rewards and pay back the whole debt in bulk.
The interest rate in both cases is not going to be the same.
Pay back before the due date
Regular use of your credit cards and repayment as at when due is a great way to improve your credit profile with the bank and other financial institutions.
This will also make your credit score look better and make it easier for you to make big financial moves in the future.
If you can, always pay back before the due date. This will help boost your financial performance.
Look out for rewards
The rewards on your credit cards are for you, so do not waste them. Therefore, take your time to read through the rewards and other benefits attached to your credit card and its use.
Through this, you can enjoy privileges like special discounts when you pay for products and services as well as free access to lounges and priority service at designated airports, polo clubs, golf clubs etc.
Minimize risk by using your credit cards at trusted merchants
Either when you are shopping online or at a physical retail store, ensure that they are trusted establishments.
Do not upload your card details or just any site, neither should you swipe credit cards across any device that you do not trust.
For trusted merchants, you could tell by a bold and clear notice informing customers that they accept credit cards. Also, ensure that you can confirm that they have a complaints reception and response avenue in case you need to lodge a complaint.
Also, put your ears to the ground for complaints relating to credit card use with such a retailer. That could save you from a grave situation. In today’s world of increasing cyber theft, you cannot be too careful.
Be prudent with your credit card use
You now have a credit card in your wallet and can probably afford whatever you want at the moment. However, you must be careful not to get carried away.
Be prudent with your expenses. Treat the money in the card like it’s not yours (it’s actually not yours). If you treat it like money that you already earned, there is a likelihood that you may end up becoming reckless with the funds therein and this may spell doom for you in a not-so-far future.