Published in: Credit Cards | June 10, 2019

How to Pick the Right Credit Card for You

There are hundreds of credit cards out there -- which one is right for you? We'll help you figure it out.

Stack of colorful credit cards.

Image source: Getty Images

Picking a credit card is an important decision. Research has shown most people stick with the card they choose for years -- and the card you pick could have a big impact on how much you pay in interest and what rewards you earn.

Unfortunately, selecting the right credit card can also be a big challenge. There are tons of credit cards out there, all competing for your business and making grand promises of perks and bonuses. You’ll need to figure out what features to prioritize, and weed through all of the different card offers to pick the card that makes the most sense for your situation.

Not sure how to start the process? Ask yourself these six questions to pick the best credit card for you.

1. Will you carry a balance?

If you’re going to charge more on your card than you can afford to pay off each billing cycle, then the single most important thing to do is to pick a card with a low interest rate.

With the average interest rate on credit cards topping 16%, the interest you pay is always going to far exceed even the most generous rewards points you could earn. After all, most cards don’t offer more than 5% cash back on spending -- at most -- and 5% is well below 16%.

There are lots of cards out there that offer a 0% promotional APR for a certain period of time, such as six or 12 months. If you’ll be carrying a balance for a short time, or if you’re willing to change cards every year so you can always have a card with a 0% promotional rate in effect, these cards can be the best choice for you.

If you know you’ll carry a balance over the long term and don’t want to be bothered with changing cards or transferring remaining balances, look for a card with the lowest overall APR. It would be better to make a commitment to pay down debt and stop carrying a credit card balance, but this isn’t always a realistic goal, depending upon your income and lifestyle.

2. Is paying an annual fee worth it?

If you won’t be carrying a balance, the next big question is whether paying an annual fee might ever be worth it for you. Otherwise, you’ll want to restrict your search for a card to those with no annual fee.

Some credit cards cost several hundred dollars per year. Cards with annual fees typically offer much more generous perks and rewards than cards that don’t charge these fees. You may get many more rewards points, credits for travel or certain purchases you make, access to airport lounges, or other special perks.

These cards are only worth it, though, if you’re going to spend enough that the extra rewards you earn will more than make up for the annual fee -- or if you’ll actually use the bonus perks enough to justify the fee. Think about your lifestyle when you make this assessment. If you don’t travel much and charge only a few hundred dollars per month, then paying an annual fee is not worth it for you and you should only look for cards that are free.

3. What do you spend money on?

If you’re not going to carry a balance, look for a card -- either with or without an annual fee -- that allows you to earn the maximum possible rewards for the spending you do.

If you spend money across a broad range of categories and only want to use one credit card, you may be better off with a card that offers the highest percentage of cash back for all purchases.

If you have specific areas where you tend to spend the most, it makes much more sense to look for a card that rewards the kind of spending you do. For example, if you have a whole bunch of kids and the bulk of your money goes to groceries, choose a card that offers extra perks for grocery store spending.

There are some cards that offer rotating bonuses, such as 5% cash back on groceries during one quarter and 5% cash back on gas during another. These cards can make sense if you’re willing to keep track of when you earn the bonus and if you have other cards you can use to earn extra cash back during the off months. But this is often more hassle than many people are willing to deal with.

4. Can you qualify for any bonus programs?

Some credit cards will reward you with extra cash back, waived fees, and other perks if you fulfill certain requirements. For example, some banks will allow you to qualify for special perks if you keep a high enough balance in their investment accounts. Some perks include waived bank account fees, bonus cash, free trades in your investment account, and more.

Check with existing financial institutions you have a relationship with to see if there’s a similar program you could qualify for. If you can, it may make sense to get a card offered by that card issuer so you can claim all these added bonuses.

5. Will you take advantage of other perks?

Most cards offer at least some perks beyond rewards points. Depending upon the card, this could include things such as free Uber rides, a statement credit if you pay for TSA PreCheck, a credit for airline incidental costs such as baggage fees, or hotel upgrades.

Typically, these annual benefits are limited -- such as a single $100 statement credit for airline incidentals during each year -- so they aren’t usually as important as the rewards points you’ll earn for everyday spending. But if you’re certain these extra benefits are ones you’ll definitely take advantage of, this can set one card apart from the rest.

6. Are you eligible for a sign-up bonus?

Finally, many cards offer a one-time sign-up bonus, such as $500 if you spend $3,000 in the first three months. Again, these bonuses are one-time bonuses, so they aren’t as important as other rewards. However, if you’re deciding between two cards that have otherwise similar features, a better sign-up bonus could seal the deal for one of the two.

Before you commit to a card because of a big sign-up bonus, read the fine print. If you won’t meet the requirements because you won’t spend enough during the requisite time frame, then a big promised bonus actually is worth nothing to you.

The right credit card is different for everyone

You have a unique spending profile and attitude towards debt, so you need to look for a card that’s a good match for you. By answering these six questions you should be able to find the perfect card that will keep your costs down and allow you to earn rewards that are actually worthwhile.

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