“Pick a card, any card” is a catchy way to start a magic trick, but it’s no way to decide which credit cards to apply for. Shiny and colorful, they may all look similar, but there are a lot of important differences behind the plastic that can make any credit card either a wise decision or a costly mistake. Keep these factors in mind when evaluating offers.
Application and Late Fees
Credit cards can come with a number of fees: application fees, annual fees, late payment fees, over-limit fees, cash advance fees, balance transfer fees … the list goes on and on. And it can vary from one issuer to another. Opt for a card with reasonable fees or, better yet, one that waives many of them altogether.
Annual Percentage Rate (APR)
The APR is a measure of the annual costs associated with borrowing over the course of a year, and it determines what you’ll pay on balances carried over from month to month. Lower APRs mean less interest accrued, ultimately saving you money. It includes not only the interest rate on the loan or credit card balance, but also any additional fees or charges that may apply, such as an annual fee. The APR allows borrowers to compare the costs of different credit options more accurately. In particular, you should pay close attention to promotional or introductory rates versus standard rates, as these can vary widely.
Secured vs. Non-secured Cards
If you’re building or rebuilding credit, a secured card may be your best bet. These cards require a deposit, which serves as collateral, and often have lower credit limits. Non-secured cards, on the other hand, don’t require a deposit but may come with higher interest rates.
0% Balance Transfer Offers
Transferring high-interest balances to a card with a 0% introductory rate can be a game-changer in helping to pay down debt faster. Look for cards offering this feature, but be mindful of any transfer fees, late payment fees and the duration of the promotional period.
Cash-back Rewards and Points
Make your spending work for you by choosing a card that offers rewards aligned with your lifestyle. Cash-back rewards are often offered on certain (sometimes rotating) categories of purchases like groceries or gas, while points can be redeemed for things like travel, merchandise or even statement credits. Evaluate the rewards structure and consider which one offers the maximum benefits given your particular spending habits.
Purchase Protection and Insurance
Some credit cards offer valuable perks like extended warranty protection, purchase insurance and even travel insurance. These benefits can save you money and provide greater peace of mind when making significant purchases or traveling.
Don’t Fall for a Card Trick
Don’t just accept the first offer that comes your way — it might not be the best deal for you. And read all the fine print carefully, as sometimes there are hidden fees or terms that can end up costing you a lot. If you choose a rewards card, make sure the rewards you receive will be worth the benefits in light of any fees, and that it offers a competitive APR. Don’t choose a card just because it’s popular or prestigious; focus on what suits your specific financial needs instead.
By evaluating credit card offers based on objective criteria related to your specific financial situation, you can help stack the deck in your favor for making an important financial decision that will serve you better in the long run.