How Do You Choose The Best Credit Card?

Cole Mayer  | 

From credit limits to different rewards, credit cards can be vastly different from each other — even from the same lender. Does the reward matter if there is a hefty fee to use the card each year? Is a high credit limit good when it comes with high interest? Is a student or secured card better for your situation? From your financial situation and credit score to what rewards are offered, let’s go over how to compare and choose the best credit card for you.

A Word of Caution

Before we look at how to compare credit cards, there are a few words of caution that bear listing. First, though it is a great idea to have multiple credit cards in order to build credit, opening multiple credit cards at the same time will hurt your credit score. Each card opened requires a hard inquiry, which will negatively impact your score. A hard inquiry or even two in a short time won’t do much, but a flurry of new credit cards will reflect poorly on your score. Lenders will also wonder why you are opening so many credit cards — and whether you truly intend to pay the credit off.

Opening multiple cards also hurts the average age of your accounts, further lowering your credit score. If you only have one or two credit cards, but have had them for years, opening multiple new credit cards will greatly reduce the average age.

Cards for Building Credit

If your financial status is fairly good — you have a good job, you are on top of car or student debt payments, you are able to tuck a bit of money away each month — then you are the perfect candidate for a general credit card. Choosing the best credit card for you, based on your own needs, is now the goal, rather than simply building credit.

First, we need to look at what your current financial situation is, specifically your credit score. If you are looking to start building credit, or need to rebuild your credit, you may have limited options.

To help you learn how to use a credit card and foster good spending habits, consider using a secured credit card. This works like a cross between a debit card and prepaid card. While you are required to pay a security deposit, you aren’t using this money. Instead, you use the lender’s money, while they hold your deposit. Spending limits are based on a security deposit, and may be more than the deposit itself.

Similarly, there are student credit cards, designed with lower credit limits, and requiring payment once the limit is reached. These cards also tend to have lower interest rates, something we’ll discuss in a moment. Much like a secured credit card, student cards are meant to teach good spending habits.

Annual Percentage Rate

If your financial situation is in good shape, choosing the right credit card comes down to details. Two major components of a credit card account are the spending limit and the annual percentage rate, or APR.

APR is unavoidable — it’s part of how the lender makes money — but they may offer low or no APR for a certain period after opening the account. For example, you may find you don’t have to pay interest for a year, but then will pay based on your credit score. This is perfect if you are switching credit cards and are trying to pay down what you already owe.

Be warned, however — if your card comes with 0 percent APR for the first year, and you miss a payment, the offer may be rescinded and the card will revert to its normal APR before the year is up.

Failing to pay a minimum monthly bill after the offer period, if any, will result in an increased APR, and will also likely result in late fees. However, paying off your entire bill every month will mean the APR’s calculation comes to zero interest.

Though it is increasingly rare, there may also be a flat yearly fee to keep the account open. Except for prestigious cards, this is likely not worth it — something will discuss later.

Credit Card Limits

High credit limits are often desirable, but cards that start with a high limit may also come with a high interest rate. Choosing the right credit card involves finding a balance between the two. If you are able to pay most or all of what you put on credit by the time the next bill comes around, a high APR may not be a problem. With a higher credit score, you may be able to apply for a higher credit limit.

A higher credit limit may also encourage spending more than you can truly handle. It’s important to know your personal limits, and not spend beyond your means. Instead, you should increase your credit limit (especially if there is not a fee associated with requesting an increase) in order to change your utilization ratio.

Utilization ratio is how much of your credit limit is used on a revolving basis. For instance, if you keep $1,000 on your credit card, but your credit limit is $3,000, you have a 33 percent utilization ratio. A best practice is to keep this number under 30 percent. But, as mentioned, with a high credit limit, you might find yourself tempted to spend more, increasing the ratio and potentially hurting your credit score.

Credit Card Rewards

For many, credit card rewards are how they compare cards, and the final determining factor for their best credit card. Rewards can include “miles” on airlines, a percentage of cash back, or earning money to spend at a specific store. Earning these rewards might be the sole motivation for opening a credit card.

Some prestigious cards have even more benefits and rewards, such as travel insurance, product warranties, and more. These often have higher credit limits, but also often come with a hefty yearly fee.

These cards can have fees anywhere from $150 to nearly $500, but also include perks such as free hotel stays or credit with a store, built into the fee. For some, the fee is worth the perks. If you stay at a particular hotel chain often, perhaps for business, receiving a free night every five stays that are charged to the card may well be worth the fee.

There’s an entire subculture of people devoted to maximizing rewards, especially travel miles. Known as “churning,” the goal is to open a card with rewards that can easily be obtained, such as by maxing out a small credit limit within a year, and then closing the account by paying the bill in full. However, as mentioned earlier, this will hurt your credit score due to the average age of accounts. This is something we will explore more in another article.

Cardholder Customer Service

Finally, how is the lender’s customer service? It may seem like something small when signing up for a card, but when it comes time to dispute a charge or change something on your account, customer service will matter.

Is the lender’s website easy to navigate? Is it easy to pay your bill online, or through an app on your phone? What is the lender’s phone system like — will you be faced with a robot trying to direct your calls for 20 minutes before reaching an actual person?

Customer service should be a factor, though one that perhaps does not weigh as much as the other factors when it comes to a final decision.

Choosing the Best Credit Card For You

There are a number of factors to weigh in helping you decide which credit card is right for you and your situation. Financial status and credit score is the first hurdle. After that, it’s up to you to decide if you want a higher credit limit, lower APR, or rewards. Sometimes, a flat yearly fee is worth the benefits the card and lender offer. Poor customer service with the lender might be a turnoff to opening an account with a specific company. All of these factors make up an overall decision. With a basic understanding of each factor, you should be able to make a decision based on your needs and wants, in order to choose the best credit card for you.


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Cole Mayer is an online marketing specialist and corporate blog writer. A former newspaper journalist, he spends his free time freelance writing, playing video games, and learning about every subject under the sun. Follow Cole on Twitter: @ColeMayer42

This post was updated September 7, 2017. It was originally published August 14, 2017.