In order for us to continue providing great, free content, this post may contain affiliate links that we may earn a small commission on at no additional cost to you. Read our full disclosure.
If you’re considering getting a new credit card, there are many factors to consider in order to pick the right one for you. There are endless credit cards to choose from, so take your time to ensure you’re getting the best one. You will be happy later that you spent the time to learn more about the different aspects of a credit card and what to look for before you apply.
Annual Percentage Rate (APR)
For credit cards, the interest rate is called the annual percentage rate or APR. Many cards have introductory APRs for the first 6 months or year, which attracts people and distracts them from the APR after that point. Find out the APR after the introductory period and compare that to other credit card offers. You should try to pay your credit card back in full each month, but you still need to understand how much interest you will be paying if you are unable to pay your full balance.
Credit Limit
The credit limit is an important factor in choosing a credit card, but if you are responsible and pay at least the minimum balance on time each month then after 6 months-1 year you can request a higher credit limit. Some companies will allow you to do this over the phone and others may require you to mail a form. But don’t stop paying on time after you get your credit limit raised! If you get a higher credit limit and keep your balance at the same point it was previously you will improve your credit utilization rate and ultimately your credit score.
Fees
There are SO many fees to consider when comparing credit cards. Many of these fees will not be broadcasted in the promotional materials so you’ll have to read the fine print.
- Annual Fee: Some cards have an annual fee so you should try to find one with a low annual fee or one that doesn’t have an annual fee at all.
- Exceeding Credit Limit Fee: For some credit cards you will be allowed to exceed your credit limit, but you will be charged a fee for doing so. You should be aware of this fee, but do your best to avoid exceeding your credit limit.
- Balance Transfers Fee: Transferring a balance to a new credit card is common, especially to one with a low introductory APR. However, be aware that there is usually a balance transfer fee so if you’re planning on transferring a balance you should compare this fee with a few other cards.
- Cash Advance Fee: A cash advance is borrowing money from your credit limit that you will have to pay back with interest. Be careful getting a cash advance from a credit card as there is usually a fee and interest will build up fast on a large balance. To prevent needing to do this, you should try to manage your spending by using a simple budgeting technique.
Rewards
Now for the good stuff! A great reason to get a credit card is for the rewards points or cash back! Many cards have rewards so you’ll need to compare how it is calculated and how you get the rewards or cash back. Also be aware that some cards have different percentage points back for different categories, like gas stations, retail stores, restaurants, etc., so you should find a card with rewards that makes sense for your spending habits.
Credit Score
The credit cards that you qualify for depends on your credit score, so you should check your credit score before applying. Most credit cards state the credit score range they accept on their website before you apply. If you find that your credit score is not as high as you would like, learn how you can improve your credit.
You can get your FICO credit score for free from Experian. It offers access to your Experian credit report and includes credit monitoring and alerts. Experian Boost also enables you to improve your credit score by adding payments that are left out of your credit history, like cell phone, utility bills and even Netflix, to your Experian credit report. The best part is that it’s free!
It is also a good idea to get your free annual credit reports and dispute any errors before you apply for a new line of credit.
Financial freedom begins with good habits.
Rebecca & Tiago, theloadedpig.com