Credit cards are not one-size-fits-all. There are a plethora of credit cards out there that are more suitable to a myriad of different situations.
For example, there are credit cards that are good for travelling but aren’t necessarily good for grocery shopping. There are others that are good for earning cash-backs but not for earning travel points.
You can get the most value from your credit card if you select the right card for the right purpose.
In this post, we will give four tips on how to select the right credit card to meet your specific need.
When you are selecting a credit card, ask yourself these four questions:
- What will you use the credit card for?
- What’s the cost of owning the card?
- What are the incentives, rewards, and benefits of owning the card?
- What’s the credit limit on the card?
What Will You Use The Credit Card For?
All credit cards are not made equal. If you are a person who travels a lot, it will make sense to get a travel credit card that gives you travel points.
Some credit cards are more suited than others for certain situations. There are credit cards for gas, for hotels, groceries, credit building, and more.
Before you apply for a credit card, try to determine what you want to use the credit card for. You will get the most from your credit card if you know what kind of expense it is best suited for.
[READ: 22 Ways To Cut Cost, Save Money And Make Your Budget Work]Are Your Building Credit?
Let’s say you want to establish or rebuild credit, a secured credit card will be the best choice for you. If you try getting a travel credit card, it is likely that wouldn’t get approved. That’s because credit card companies normally base their credit card offering on your credit score.
A poor or non-existent credit score means it will be difficult for you to get credit.
Are You Consolidating Your Debt?
If you are consolidating your debt, it will make sense to get 18 to 21 months 0% APR credit card. A zero per cent APR credit card essentially gives you free money for a period. Imagine a bank gives you a $10,000 loan at 0% interest for 12 – 21 months. That’s exactly what a 0% APR credit card does.
Most people who get this kind of card — a “debt consolidation” credit card — will use it to pay off their other credit card debts. This saves them in interest expense and consolidates all their credit card debt with just one creditor — the issuer of the 0% APR credit card.
[READ: 15 Amazingly Simple Ways To Pay Your Debt]What’s The Cost Of Owning The Card — Interest, Fees, And Penalties?
Before you sign up for a credit card, be sure to check all the associated costs –the interest rate, the associated fees and penalties, ect..
Most credit cards charge a series of fees, and saving money on credit card fees will depend on the credit card you select. Some credit cards charge a fee for certain activities while others don’t.
For example, the American Express Gold credit card charges a $550 annual fee plus $175 for each person you add to the account. To their credit, they do offer a lot of benefits and perks to offset that cost. However, if you are not using those perks, it might make little sense to get the American Express Gold credit card, especially if you can get a similar credit limit on a credit card that charges less in annual fees.
Below are some of the most common credit card fees.
Common Credit Card Fees
Most credit card companies generate revenue by charging an array of different fees. Here are some of the most common fees credit card companies charge.
- Annual fees
- Cash Advance fees
- Balance transfer fees
- Foreign transaction fees
- Late fees
- Returned payment fees
- Card replacement fees
You should check the different fees a credit card company charges before you sign up. Not knowing all of that can put you in financial trouble.
What Are The Benefits, Rewards, And Incentives?
Before you select a credit card, it will be great to know the kinds of rewards, perks, benefits, and incentives they offer.
Credit cards are not all about the fees and interest rates they charge, they also offer some perks and rewards. For example, though the Chase Sapphire credit card charges a $95 annual fee, they also offers the following perks and benefits:
- Primary rental car coverage.
- A generous sign-up bonus (60,000 travel points)
- one year of complimentary DashPass membership with DoorDash (free food delivery)
- $500 per ticket in delayed trip insurance and $10,000 in trip cancellation insurance.
- $3,000 per person in lost luggage reimbursement.
- $100 per day in delayed baggage insurance.
- Visa Signature Concierge Service.
- Purchase protection of up to $500 per claim and $50,000 per account.
- Extended warranty for up to one year on qualifying purchases.
These are just some of the perks, benefits, and rewards for using the Chase Sapphire credit card. As you can see, the benefits Chase Sapphire offers totally out-weights the associated annual fee, but that’s not the case with all credit cards.
If you are signing up for a credit card, read the fine prints and see what the card company has on offer for that particular credit card, and see if it fits your needs.
Not all credit cards are equal. Other credit cards come with more or less of what the Chase Sapphire credit card offers. For example, though the Chase Sapphire credit card offers primary rental car insurance coverage, that’s not the norm with credit card companies. Most credit card companies only offer secondary rental coverage.
Read the literature associated with the credit card you are applying for and understand exactly what you are signing up for.
What Is The Credit Limit?
Finally, you need to know the credit limit the credit card company is offering you. Your credit limit is the maximum amount of money the credit card company puts at your disposal. It’s the amount you can spend without incurring a penalty.
Depending on what you want to use the credit card for, your credit limit could be a deal breaker.
Most credit card companies look not just at your credit scores, but also your debt-to-income ratio to determine the credit limit they offer you.
If you have a high debt-to-income ratio, select a credit card that will offer you the most generous terms and credit limits considering your situation.
Final Thoughts
Not all credit cards are the same, that’s why it’s important to get all the relevant information on your credit card of choice before you take the plunge. The right credit card can make your life easier. Conversely, the wrong credit card can be a financial nightmare.
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