What Factors to Look for When Choosing a Credit Card

Getting your first credit card is an important financial milestone; one that is worth celebrating. You probably know how credit cards work, but the devil is in the details.

It can be quite challenging to choose the right one with different credit card offers available. Naturally, you would want something that will fit your spending volume and your current financial situation. This is just one of the important details you need to understand before diving head-first and getting a credit card.

In this article, we explain the process of getting a credit card, why you should get one, and many more details that will affect your choice.

Getting a credit card is as important for startups as it is for individuals. | Source: Pexels

Why Do You Need a Credit Card?

You may require a credit card for several financial reasons. However, the major reason you will need to get a credit card is to build credit. To efficiently do this, you need to ensure you act responsibly with your card and not use it for things you can't afford. You will always have to stick to your budget to ensure you gradually build credit. Credit cards help you earn easy rewards when you use them for transactions. With a simple flat rate on some credit cards, you can get nearly 2% back on all money you spend. Rewards are usually in place to encourage credit card usage.

Lastly, your credit cards can also help you track your spending. They help you keep tabs on your budget and enable you to curb certain spending habits. Credit cards are very useful for building digital receipts that help you figure out where your money goes and when.

How to Apply for a Credit Card

Usually, you can apply for a credit card online, at a bank, or by mail. You will have to fill out a form, and your credit card provider will examine your record with a credit reference agency to check if you are creditworthy.

Before filling out the application form for a credit card, show that you have all the correct information relating to that transaction. If you are not completely sure about completing the form, do not be scared or shy of asking your credit card provider for help. It is vital to do so because any false information provided on the form may be seen as fraud.

Before choosing a credit card, you need to consider what you want to use the card for. This could be to pay bills, purchase items online, or make subscription payments. However you decide to use your credit card, the essential thing is to pay off what you owe. This can be done every month or spread throughout a schedule.

You will have to consider the interest rates of using a credit card. If you have applied for credit cards before, ensure you aren't getting too many because regularly switching cards or using several cards can affect your credit rating.

Applying for a credit card requires that you follow the right procedures. | Source: Pexels

What to Consider When Picking a Credit Card

There are usually many options available from financial institutions when getting a credit card. You don't have to pick the first card you are offered. It will be best to do your homework and understand what to look for before choosing. Here are some factors that can help you in that decision:

1. Credit Score Requirements

Card providers do not particularly require a benchmark credit score in order to issue you a card; they only offer guidance. Certain credit cards are often intended for people within some credit score range, while others are versatile.

2. Your Plans for the Card

How you plan to use the credit card is another important factor to consider. For instance, getting a flat-rate reward card will be best if you need a card for your everyday purchases. You can also get a card specifically for grocery purchases and a travel card for handling your traveling expenses.

3. Fees

Credit card fees can affect your cost for using the card even if you don't pay interest. Some of the fees to consider include:

• Annual Fees

An annual fee is a payment required at the end of every year. Many credit card options do not require an annual fee, such as the Capital One Platinum credit card. Suppose you are given a card with an annual fee; weigh the potential benefits that come with the card against the fees before making your choice. Some platinum cards offer a high annual fee but provide more financial benefits.

• Balance Fees

Balance fees usually apply to every balance transfer. Predominantly, finding a card that charges a lower balance transfer fee is better.

• Late Fees

 Late fees occur when you don't make the minimum payment required on the card before the due date. The amount of late fees you have to pay for your card is another thing you have to consider when choosing one.

• Foreign Transaction Fee

This refers to the fees that come with transactions outside your country of origin. If you are interested in a card that can make international transactions, you must consider the foreign transaction fee.

4. Annual Percentage Rates

An annual percentage rate determines how much interest builds up when you carry a balance. A card with a low interest rate is best when considering getting a credit card.

5. Credit Limits

A card's credit limit controls how high your balance can go before you are cut off from additional purchases. Credit limits can depend on credit history and credit scores. It is better to request a card with a high credit limit.

Conclusion

Choosing a credit card depends on many features, fees, personal preferences, and financial capabilities. The most important thing is to get the most cost-effective and functional credit card that is best for you. You also have to ensure the fees charged are ones you're comfortable with and can be sustained.

References

Experian: Do You Really Need a Credit Card?

Nav: How to Apply for a Business Credit Card

NerdWallet: How to Pick the Best Credit Card for You

CNBC: 8 common credit card fees and how to avoid them

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