How to Choose a Credit Card for a Recession

A quality credit card can help more than you might think during a lull in the economy.

Financial experts have been talking about a potential recession for months now. There's no way to be sure if we're in store for a recession in 2023, but it certainly could happen, so it's smart to prepare for that possibility.

There are several good steps you can take to be ready for a recession, like boosting your emergency fund and looking for other sources of income. One that doesn't get discussed as often is having the right credit card.

You can get all kinds of perks from the best credit cards, including some that could really come in handy if the economy slows down. Here are a few things to consider to help you choose a credit card for a recession.

Think money will get tight? Pay off purchases over time with a 0% intro APR card

One of the biggest recession fears is losing your job and being unable to pay your bills. Ideally, you'll have enough in your emergency fund to cover you until you find work again. But if your emergency fund is still a work in progress, or you're out of work for an extended period of time, you could need to borrow money to pay your living expenses.

Every credit card lets you borrow money and pay off charges over time. However, most of them have high interest rates. If you think you'll need to carry a balance on your credit card, look at 0% intro APR credit cards.

These cards have a 0% APR on purchases you make for an introductory period. Some of the top 0% APR credit cards offer intro periods of 15 months or longer. During that time, you won't be charged interest on purchases. The only thing you need to do is at least pay the minimum every month.

If you're in a strong position financially, save money with a cash back card

Depending on your financial situation, you may feel pretty confident in your ability to ride out a recession. For example, if you have a 12-month emergency fund, that would give you a lot of breathing room even if you lost your job. If you also have excellent employment prospects, then you have good odds of getting through a recession without needing to borrow money.

In this case, consider credit cards that earn you cash back on your purchases. Lots of cards offer cash rewards, and some of the best cash back credit cards earn elevated rates in bonus categories. For example, you can find cards that earn more on any of the following:

• Grocery stores
• Gas stations
• Dining and restaurants
• Streaming services
• Entertainment

Find a card that matches up well with your spending habits, and you'll save big on your everyday expenses. Or you could go with a card that earns a high flat rate, such as 2% back, across all categories.

Get a better deal on debt with a balance transfer credit card

Debt can be problematic during a recession. It adds to your monthly bills, and it costs you money through interest charges. Not all types of debt are an issue, but high-interest debt definitely is.

If you have any high-interest debt now, or if you incur any during a recession, a balance transfer card can help you pay it off. A balance transfer is when you move a debt balance over to a credit card. You could look at it like paying off debt with your credit card.

Why would you want to do this? Because many of these cards offer a 0% intro APR on balance transfers. During the intro period, you don't get charged interest on balances you bring over. While balance transfer credit cards are often used with credit card debt, they can also be used to pay off personal loans.

Just like with 0% APR credit cards, there are balance transfer cards with intro periods of 15 months or longer. By avoiding interest for the entire intro period, you could pay off debt faster and at a much lower cost.

Compare sign-up bonuses to maximize your savings

A sign-up bonus is an incentive offered to new cardholders. This perk is common with rewards credit cards. Cash back cards often have cash rewards bonuses, and travel rewards cards typically offer bonuses in points or miles.

These are another great way to save money using credit cards. The most common requirement to earn a sign-up bonus is to spend a certain amount of money in a limited amount of time. For example, a card issuer could offer a $500 cash rewards bonus if you spend $3,000 on purchases in the first three months.

If you're doing well financially, and your main goal is saving money through credit card rewards, check out the most valuable sign-up bonus offers. As long as you can meet the bonus requirements, you'll be able to earn a nice chunk of cash back or travel rewards.

There are plenty of credit card perks that could be valuable during a recession. Consider which benefits are the best fit for your financial situation to find the card for you.