With so many credit cards available, picking one to apply for can seem overwhelming. You can make this process much easier by learning how to choose a credit card. We’ll go over all the steps to take and help you answer the question, “Which credit card is best for me?”
Here’s how to choose a credit card in four steps:
- Pick the type of credit card you want.
- Figure out the most important features.
- Compare your credit card options.
- Apply for the credit card you want.
1. Pick the type of credit card you want
There are many different credit card types out there. A big part of how to choose the right credit card is understanding how credit cards work and which type of credit card is the right fit.
Once you decide which type of card you’ll shop for, selecting a credit card is much faster and easier. A frequent traveler who wants to collect airline miles will obviously need a different type of card than a student who’s building credit for the first time.
That’s why the first step in how to choose a credit card is to figure out your main reason for getting a card. When I’m looking for the best credit card for me, I start by asking myself what I need it for. You’ll likely find that you choose a credit card for one of the following reasons.
Improve your credit score
If you want to know how to choose a credit card because you have a low credit score or no credit history yet, then credit cards for bad credit are a good place to start. Many of these are secured credit cards, which you open by paying a deposit to the credit card company. If you’re in college, student credit cards are another option.
Earn rewards on purchases
Rewards credit cards are a popular answer when consumers ask themselves, “What is the best credit card for me?” These cards allow you to earn rewards on your spending. If you want to earn cash rewards, you should look at cash back credit cards. For points you can redeem toward travel, check out travel rewards credit cards.
Pay off purchases over time without interest
If you have one or more expenses that will take you some time to pay back, 0% intro APR credit cards are just what you need. These cards offer a 0% intro APR (annual percentage rate) on purchases.
If you’re wondering how to choose a credit card with a 0% intro APR, look at the length of the introductory APR period. It can last for a year or longer, depending on the card you get. Once it ends, the APR will increase, so you should aim to pay off your full balance by then.
Save money on credit card debt
Balance transfer credit cards help you pay less interest on your debt. Like 0% intro APR cards, these cards have 0% intro APR offers that apply to balance transfers instead of purchases. You can transfer your balance from credit cards with high interest rates to a balance transfer card with a 0% intro APR.
According to research by The Ascent, the average credit card balance reached $5,897 in 2020. If you have that kind of debt, knowing how to choose a credit card with a balance transfer offer can score you big savings. Use our balance transfer calculator to see how much you could save.
2. Figure out the most important features
The next step is choosing credit card features that matter most. This will depend on the type of credit card you’re getting. Here’s how to choose a credit card with the features you need.
Credit cards for improving credit
If you want to use a credit card for bad credit, a secured card, or a student card to improve your credit, here’s what you should prioritize:
- No annual fee: You don’t want to take on any extra costs while you’re working on your credit.
- Payments reported to all three credit bureaus: The three consumer credit bureaus are Equifax, Experian, and TransUnion. All three produce credit reports which get used to calculate your credit score. To raise your credit score, you need a credit card company that reports your payments to each of them.
- Free credit score monitoring: Many credit card companies include a free credit score tool that’s updated monthly. This is a simple way to see if your score is increasing.
With secured credit cards, also look for cards that have the option to graduate. Graduation is when the card issuer upgrades your secured card and refunds your deposit. This is important because it means you can get your deposit back without needing to cancel the card.
Rewards credit cards
Perhaps you’re interested in how to pick a credit card that earns cash back or travel rewards. If you’re wondering how to choose a credit card that earns rewards, here are the features to look at:
- Rewards rate: The amount of rewards a card earns on purchases. Some cards earn a flat rate, such as 1.5%, on everything. Others earn extra in bonus categories, such as 3% on dining and 1% on everything else.
- Sign-up bonus/welcome offer: A bonus available to new cardholders. You usually get the bonus for reaching a spending minimum. For example, a card could offer a $250 bonus for spending $1,000 in the first three months. Not all rewards cards have sign-up bonuses.
- Annual fee: A yearly fee charged for the card. This can range from $0, in the case of no-annual-fee credit cards, to over $500. Part of how to choose the best credit card is weighing whether a card’s annual fee is worth it based on the perks it offers.
There are also two other features to check out if you want to know how to choose a credit card for travel:
- Ways to use travel rewards: You redeem travel rewards for travel purchases, but exactly how this works depends on the card. Make sure it will be easy to book the travel you want with whichever travel card you pick.
- No foreign transaction fees: You don’t want extra charges when you use your card internationally. Most travel cards don’t have foreign transaction fees, but it’s still good to check.
0% intro APR credit cards
When it comes to how to choose a credit card with a 0% intro APR, pay attention to how long the 0% intro APR lasts. The intro period should be long enough to pay off the purchases you’ll make. If you’re not sure how long you need, look for the longest 0% intro APR you can find.
If multiple 0% intro APR cards fit your needs, use sign-up bonuses and rewards as tiebreakers to decide which credit card is best.
Balance transfer credit cards
The length of the 0% balance transfer offer is the main feature to look at. Ideally, you should get a balance transfer card with a 0% intro APR that will last until you can pay off your debt. If that’s not possible, then you should choose the card with the longest 0% balance transfer APR.
Balance transfer fees are also important, especially if two cards are otherwise equal. If you’re stuck on how to select a credit card for balance transfers and one has a lower balance transfer fee, then that’s the clear choice.
3. Compare your credit card options
That covers most of the work behind how to choose a credit card. Now, it’s time for the fun part. Pick the top credit cards in the category you’ve chosen so you can compare them.
Let’s say you’re shopping for cash back cards. You’d choose credit card products that earn cash back and view the best options. Then, you’d look at each card’s cash back rate, sign-up bonus, and annual fee. For more detail see Types of credit cards to apply for.
4. Apply for the credit card you want
Once you’re ready to apply for a credit card, the simplest option is to apply online. Be prepared to provide the following information:
- Full name
- Date of birth
- Social Security number
- Mailing address (and your previous address if you’ve lived at your current mailing address for less than two years)
- Email address
- Phone number
- Annual income
How your credit score impacts your chance of approval
Your credit score is a big factor in how to choose a credit card, because that affects which cards you can get. Most credit cards are aimed at consumers in a specific credit score range. To have a solid chance at getting approved for a card, your credit score will need to be in that range or a higher one.
For example, the best credit cards are usually reserved for those with good or excellent credit. Good credit starts with a credit score of 670. So, if you want one of the top credit cards good credit, you should have a credit score of 670 or higher.
When credit card applications aren’t successful, it’s often because of the applicant’s credit score. In this situation, the best solution is to work on your credit, and then apply again later. Here’s what you can do:
- Make all your payments on time. Late payments can lower your credit score, so it’s important to pay everything by the due date. With credit cards and loans, on-time payments typically get reported to the credit bureaus and help your credit history.
- Cut your credit utilization. Like we covered earlier, this is one of the fastest ways to boost your credit score. Work on reducing your credit card balances so you’re not using as much credit. Another option that can work is to ask your card issuers for higher credit limits, because having more credit can also lower your credit utilization.
- Wait at least three months between credit applications. When you apply for a credit account, the card issuer performs a hard credit check. It only has a minor impact on your credit, but too many hard credit checks in a short span of time can cause you to be considered a higher-risk applicant.