These days, if you have good credit, and sometimes even if your credit needs some work, you probably receive offer after offer in the mail to apply for various credit cards. There can be a powerful temptation to sign up for every pre-approval that comes your way, and while having too many credit cards can hurt you, having the right one can offer you some incredible benefits.
Depending on your situation, there are some factors that you should consider before signing up. First-time credit card users should look for lower limits and flexible payment options. Other things to look for include rewards programs and card membership benefits.
There are countless credit cards out there and if you have the credit score to meet their qualifications they want you as a customer. Having the right card can help make the bumpy times in life a little smoother, and they can provide some significant benefits as well. We're going to take a deeper look at what to consider in your next credit card.
What To Look For In Your First Credit Card
Credit cards are powerful tools for both buying and for building credit. If you are getting ready to apply for your first credit card, your concerns will largely be the same as people with established credit who are looking for more powerful cards, with some special attention to certain things.
You'll want your card to be usable at the widest variety of locations, so stick to "open-loop" credit cards like Visa, American Express, and Discover. Since you're only going to want to open one account initially, stay away from "closed-loop" cards, or cards that are only good are specific stores.
2. Annual & Other Fees
You're going to make mistakes with a credit card, it's inevitable and it's part of learning, but you shouldn't have to pay painfully high fees to be allowed to make those mistakes. Your first card should have no annual fee, and the potential fees for late payments should be as low as possible. While it's unlikely that you'll be able to get a low APR on your first card, you should also make sure you're getting the lowest rate possible.
3. Credit Limit
You may get some incredible offers if you've already begun establishing a credit history with a car loan or installment loan, for example, and these offers may include cards that have relatively high credit limits. While you may think that even if you don't need the limit that it'll be good in an emergency, keep the limit low. You'll need to get used to making payments and keeping your utilization under control initially.
Credit Card Benefits & Rewards
When you're in the market for a credit card, you don't just want another functional line of credit, you want to make sure that you're getting everything you can out of it. With some cards, this could mean some great travel perks and freebies, as well as significant reward and discount opportunities. Before you go click the apply button on some cards you just Googled, take a look at these things you should consider first.
Further Reading: Buy A Car With A Credit Card: Can You Do It?
4. Card Credit Requirements
Making sure you pay attention to the approval odds is one of the most significant, and it's one of the most frequently overlooked things about a potential credit card. Many people will simply apply for the first card they see or one whose ad caught their eye, without thinking about the impact that application alone can have on their credit. Every application does a credit pull, and credit inquiries can stay on your credit report for years.
Most cards will have pre-qualification questions that may get you closer to knowing your approval odds before submitting the formal application for credit. Most of the common credit monitoring apps, like Credit Karma, will also give you your estimated FICO score and tell you your odds of being approved, which can increase your chances as well.
5. Annual Fee
Another major thing to look at with a potential card is what it's going to cost you. Some cards have annual fees that you are charged automatically, and while some are modest and under $100 or so, some have annual fees of $500 or more.
Most of the cards that charge annual fees, however, have much more expansive card perks and benefits. This isn't to say that no-annual-fee cards are less useful, but they will often have more limited base perks for account holders.
6. Your Approved APR
The interest rate that you're offered isn't going to be something that you'll be able to shop around for, too much. You will see that most cards with a variable APR have a range of between 12% and 30%, but your rate will be part of your approval terms.
When you screen cards to potentially apply for, find the lowest range you can and make sure your credit looks as good as possible before applying. Once you get your approval, it will state the approved interest rate, which you can either accept or reject by closing your account.
An important thing to pay attention to is whether the credit card provider is offering any APR promotions at the time you want to apply. A common promotion is an introductory APR of 0% for 12-18 months after opening the account, this can let you purchase significant amounts without the normal interest you'd be charged for paying off the purchases over time. This can apply to purchases and balance transfers depending on the offer.
7. Cardholder Perks
Cardholder perks vary significantly depending on the card, and often, the annual fee. Some perks include seat upgrades and travel credits, free baggage credits, account anniversary gifts like hotel stays, and more. The perks of many cards will be aligned with their purpose, for example, travel rewards cards generally offer many more travel-related perks than cash-back cards.
Rewards programs vary considerably from card to card, but in general, if you get a rewards card you'll be earning "points" of some kind that will be tracked by your credit provider. These points will be accumulated in proportion to how many dollars are spent on purchases with the card and can subsequently be spent on various rewards.
One common rewards program is earning points or "miles" for travel expenses, which can help you fund vacations with the gas and groceries you buy daily. There are also rewards programs that simply function as cash-back programs, allowing the cardholder to accumulate potential financial rewards or statement credits.
9. Balance Transfer Benefits
A balance transfer is taking a balance or debt with one credit card and transferring it over to another card, usually a new one. While this isn't going to apply to everyone, those who carry a balance on an existing card and who are looking for a new card should look for one with favorable balance transfer terms.
If your new card is running an intro APR promotion, you can move existing high-interest debt to a lower-interest card, and essentially pause the interest on it. In some cases, the intro APR for balance transfers is long enough that you can pay off the balance before the promotion is over, saving you money.
Also Read: What Credit Card Issuers Allow a Co-signer?
What Credit Card Should I Get?
While we can't tell you the best card for you, or which ones specifically you should get, we can show you what to look for and provide some examples. We've given you lots of things to look for, and here are some of the better cards out there right now that you can see some of these benefits in. We've given you a quick rundown of each, below.
Capital One Quicksilver Cash Rewards Credit Card
The Capital One Quicksilver Cash Rewards Credit Card is a super-simple rewards card for those looking to get a credit card. It has no annual fee and 0% APR on balances and transfers for the first 15 months and a variable APR of 14.99%-24.99% after that. Rewards accumulate at the rate of 1.5% across all purchases and don't expire.
American Express Gold Card
For those who don't mind an annual fee and enjoy a few more card perks, the American Express Gold Card provides a long list of benefits for a $250 annual fee. Included in the perks are additional baggage and rental insurance while traveling. Substantial $120 annual dining credit at select locations, 4x points accumulation at all US dining and supermarket locations, and 3x points on flights booked through the Amex Travel portal.
Chase SavorOne Cash Rewards Credit Card
The Chase SavorOne Cash Rewards Credit Card is a solid rewards card with a 0% APR offer for the first 15 months, and 14.99%-24.99% after. They also offer a one-time bonus of $200 if $500 is spent within the first 3 months of opening the account. No annual fee, transaction fee, or rewards expiration. You can earn 3% off of any dining, entertainment, or streaming purchases, as well as at stores like Walmart and Target, and 1% everywhere else.
Regardless of the credit card you choose, remember it is meant to be used as a tool to help you in your daily life. Make sure to reap all the benefits your credit card has to offer. And to get the best experience possible, watch how much you spend, pay on time, look out for steep charges and the added interest that come with it when not used correctly.
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Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author. He's been featured on The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.