Four steps to pick the best credit card
Finding the best credit card is part art, part science.
No single credit card is better than all others in all categories 鈥� or for all people.聽But by understanding your options and asking the right questions,聽you can find the card that鈥檚 the best fit for your spending habits and credit situation.
Follow聽these four steps to find the best credit card for you.
1. Check your credit
Find out what credit card offers you might be eligible聽for by checking your credit score. The better your score, the greater your chance of being approved for cards with better perks.聽聽give their cardholders free access to their FICO credit score, and several聽聽provide different types of credit scores. You can also buy your score directly from the three major credit bureaus (Experian, Equifax and TransUnion).
If the number isn鈥檛 what you expected, check your credit reports to see what鈥檚 causing the problem. You can then start figuring out ways to聽improve聽it, from聽changing your spending habits to聽聽on your reports, if you need to. Federal law entitles you to one free copy of your credit report from each of the three major bureaus every 12 months. Get your free reports at聽, a federally authorized site.
2.聽Identify which聽type of credit card you need
There are three general types of credit cards:
- Cards that help you improve your聽credit when it鈥檚 limited or damaged.
- Cards that save you money on interest.
- Cards that earn rewards.
The best card for you is one with features designed to meet your specific needs. If you don鈥檛 travel much, for example, then the best travel card in the world isn鈥檛 going to do you a lot of聽good.
If you want to build or rebuild credit: Student or secured credit card
, unsecured cards meant for college students who are new to credit, are easier to qualify for than other types of credit cards. So聽are聽, which generally require a security deposit of $200 or more. Your聽deposit聽is returned to you when the account is upgraded or closed in good standing.
If you want to save on interest: Low-interest, 0% APR or balance transfer card
A card with an introductory聽聽could be a good match for you if you plan to use your credit card in case of emergencies, or if you have an irregular income and carry a balance from time to time. 础听聽could help you pay off a high-interest debt interest-free. Keep in mind that these offers may be harder to find if you have average or poor credit.
MORE: Find the best low-interest or 0% APR credit card with聽.
If you want to earn rewards: Rewards, travel or cash back
础听聽is a good match for you if you pay off your balance聽in full every month and never incur interest.聽These cards typically have higher APRs, but offer larger sign-up bonuses and give you聽points, miles or聽聽on every dollar you spend.
MORE: Find the best rewards credit card with聽.
3. Narrow your choices by asking the right questions
痴颈蝉颈迟听聽and search for the type of credit card you鈥檙e looking for, filtering results according to your credit score and monthly spending.聽As you go through the top picks, consider聽these questions.
For student and secured cards:
- Will this card help me build my credit?聽Look for a card that reports your credit card payments to the three major credit bureaus. Many secured cards don鈥檛 do this.
- How much does it cost to open an account, including the annual fee?聽The rewards on these cards generally aren鈥檛 high enough to warrant an annual fee. Unless you have very poor credit, you can likely聽avoid this expense.聽For secured cards, the lower the security deposit, the better, although your credit limit may be tied directly to how much of a deposit you make.
- Can I graduate to a better card later on?聽Choose a card that will let you build your credit and upgrade to a聽card with more competitive terms.聽This makes it easier to leave your card open longer, boosting your average age of accounts in the long run.
For low-interest, 0% APR or balance transfer cards:
- How long is the 0% APR period, and what is the ongoing interest APR?Look for a card that gives you enough time to pay off your debt interest-free. If you鈥檙e planning on carrying balances over several years, consider a credit card with a low ongoing APR.
- What is the card鈥檚 balance transfer policy?聽If you鈥檙e doing a balance transfer, look up a card鈥檚 balance transfer fees. Find out what types of debt you can transfer and whether there鈥檚 a limit to how much you can move over. Note that the balance transfer APR on a card聽may be different from the聽purchase APR.
- Does the card offer rewards?聽If you鈥檙e looking for only a few months of 0% APR 鈥� perhaps instead of a sign-up bonus 鈥� you may be able to find a card that doles out generous ongoing rewards as well.
For rewards, travel or cash-back cards:
- How do I spend my money?聽Look for a card that delivers the highest rewards for the categories you spend the most on. If you鈥檙e a big spender, consider getting a card with an annual fee, if your rewards earnings would offset the cost. If you鈥檙e planning to use the card abroad, look for one with no foreign transaction fees and, rather than the chip-and-signature technology that鈥檚 standard in the U.S. This goes for other types of cards too.
- How complicated is this credit card?聽If you don鈥檛 want to contend with limited award seat availability, spending caps, rotating bonus rewards and loyalty tiers, consider a card with flat-rate cash-back rewards.
- How quickly will I earn rewards, and how much are they worth?聽Read NerdWallet鈥檚聽聽to find the answers to these questions.
4. Apply for the card that offers you the highest overall value
Narrowing your choices is the easy part, but deciding between two or three similar cards can be quite difficult.聽If you鈥檝e already found a clear winner after聽Step 3, go with that one. If not, it鈥檚 time for a tiebreaker round.
Look closely for differences. All other values being equal, here are some factors that might set a card apart:
For student and secured cards:
- Credit limit automatically increases.聽Certain聽cards let you increase your limit after a few consecutive on-time payments.
- Interest paid on your deposit.聽Some secured cards place your security deposit聽in an interest-earning CD. This way, you can earn a small amount of money on it.
For low-interest, 0% APR or balance transfer cards:
- Debt payoff planner.聽Some issuers聽let you create your own debt payoff plan on an online portal, a valuable tool if you鈥檙e overwhelmed with debt.
- No late fees or penalty APR.聽Certain cards waive these charges. If you fall behind on payments, this could come in handy.
For rewards, travel or cash-back cards:
- Lower required spending.聽The less you need to spend to qualify for a sign-up bonus, the better.
- No expiration date on rewards.聽On some cards, you can use your rewards as long as you keep the card open.
When you finally pick聽a聽card, keep in mind that, on the application, you can include all income you have reasonable access to, not just your personal income. For students, that can include money from grants and scholarships, or allowances from parents. For others, it may include a partner or spouse鈥檚 income.
So you鈥檝e found the best credit聽card. What鈥檚 next?
Choosing the best credit card is an important decision, but don鈥檛 stop there. Use your card the right way聽to get the most for your money. If you鈥檙e trying to establish credit, pay your bill in full every month and don鈥檛 use too much of your available credit. Stick to your debt payoff plan if you snagged a 0% APR deal. And if you鈥檙e trying to rack up rewards, use your card for everyday purchases and pay your bill in full every month.
The credit card you choose should help you achieve your financial goals in the most affordable, efficient way possible, whether you鈥檙e trying to build credit, borrow money or earn rewards. Don鈥檛 settle for聽less.
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