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How to choose the right credit card for you

  • Meghan Hunter

    • Signing up for credit cards through partner links earns us a commission. Terms apply to the offers listed on this page. Here’s our full advertising policy: How we make money.

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    Opening a credit card and taking on credit is a financial decision that shouldn’t be taken lightly. Managing credit responsibly is the key to a healthy credit score — something that will have an impact on you throughout your life. With good credit, it’ll be easier to buy a car, qualify for a home loan and get the best insurance rates. It’s easy to understand why you should choose a credit card wisely, and take the time to sort through your options.

    Here are six questions to ask yourself before applying for a credit card:

    What will I use the card for?

    This question will guide you throughout the decision-making process.

    If you want to consolidate debt, for example, you’ll want a card that offers a competitive balance-transfer rate and low or no interest. Or maybe you’re looking for a card for everyday spending. In that case, you’ll want a card that will reward you for your regular purchases.

    Banks offer a variety of credit cards to meet the needs of different customers, so it’s good to know you’ve got options.

    What are my spending habits?

    Determine your spending habits by asking yourself how much you will charge to a credit card each month. Do you have a large family and spend a lot on groceries? Do you live in a big city and spend frequently at restaurants? Or maybe you travel internationally and want to avoid foreign-transaction fees?

    Some cards have a set rate at which you’ll earn rewards for spending in certain categories, so year-round, you’ll earn a number of rewards for certain purchases. Others offer rotating bonus categories at certain times of the year for grocery store, travel, restaurant or gas purchases.

    Take a look at your last few months of spending to figure out your most frequently occuring expenses. Knowing your monthly spending helps you understand, in part, how easily you can meet a new card’s minimum-spending requirements.

    (Photo by WAYHOME studio/Shutterstock)

    Do I plan to carry a balance?

    It’s extremely important to understand the impact that carrying credit card balances has on your financial health. If you plan to participate in the miles-and-points hobby, we always recommend paying off your balances in full every month. Otherwise, the interest you’ll pay will negate any rewards you earn.

    That said, life happens. And sometimes you’re stuck carrying a balance. If that’s the case, you’ll want to look for a card with a low interest rate.

    What kind of rewards do I want to earn?

    When looking for a rewards card, pick one that offers rewards you’ll actually use. It doesn’t make sense to earn travel rewards if you don’t intend to travel. A cash-back card would likely be more beneficial.

    What type of card is right for me?

    Once you have a clear understanding of your spending habits and rewards goals, you can begin narrowing your card options based on a specific type of card:

    After you know what kind of card you’re looking for, look into specific offers.

    Does paying an annual fee make sense for me?

    Credit card annual fees vary widely, from cards with no annual fee to premium rewards cards with annual fees in the hundreds of dollars.  It comes down to doing the math — weighing the value of the rewards you’ll earn and the perks you’ll get against the cost of the annual fee.

    For example, the Chase Sapphire Reserve®, which consistently ranks as one of the best travel credit cards, has a hefty $550 annual fee that isn’t waived the first year. But as a cardholder, you’ll get valuable perks like an annual $300 travel credit and Lyft credits. And you’ll earn 50,000 Chase Ultimate Rewards points as a welcome bonus after spending $4,000 on purchases in the first three months from account opening.

    So, don’t let a card’s annual fee scare you off. Some of the most valuable rewards cards come with annual fees that are easily offset by a welcome bonus and ongoing benefits.

    Apply for a credit card

    Now, you’re ready to apply for a credit card.

    Applying is fairly straightforward. It can be done online (or in a bank branch) and you’ll usually know whether or not you’re approved within a matter of minutes. If you don’t get an instant decision on your application, you’ll only have to wait a few days to hear from the issuer.

    Once approved, you’ll be on your way. Be sure to reevaluate your spending habits and goals often to make sure the card continues to fit your needs. Make sure you’re always using a card that makes sense for your particular situation.

    Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)