1. Know Your Credit Score
Knowing your credit score can help you apply for cards that fit your credit profile. The better your score, the greater your chance of being approved for cards with better perks.
There are three ways to check your score:
- The three major credit bureaus (Experian, Equifax and TransUnion) sell credit scores.
- Many credit card issuers offer free FICO scores to their cardholders.
- Sites like Credit Karma and Credit Sesame can give you a ballpark figure for your credit score. These sites will also give you tips to improve your score if it is not what you expected.
2. Decide How You Will Use Your Credit Card
People generally use credit cards for three reasons: to build credit, consolidate debt, or earn rewards. Deciding early on what you plan to use your card for will help you determine which card is right for you.
- If you have limited or damaged credit, you may want to consider applying for a secured credit card. To open this kind of card, you must deposit a certain amount to the account. Your credit limit is the same as your deposit, so if you deposit $200 into the account, you will be able to use the card for up to $200. This type of card can help you build a credit history and improve your credit score, as long as you use it responsibly.
- If consolidating debt and carrying a balance is in your plans, a low Annual Percentage Rate (APR) should be your top priority. A low rate will help you save money on interest in the long run. Also, balance transfer promotions can make the process of consolidating debt simple.
- Looking to earn rewards? Decide which rewards will be most valuable to you. For example, if you travel frequently and the idea of free airfare and lodging excites you, consider applying for a travel rewards card. If you plan on using your card for everyday purchases, a card that offers cash back might be worth looking into.
3. Narrow Your Choices
Once you’ve decided what type of card you are interested in, find the answers to these questions to help you narrow your choices.
- How much does is costs to open an account/is there an annual fee? For secured cards, your credit limit may be tied directly to how much of a deposit you make. Ask if you can graduate to a better card later on. This will help build your credit score in the long run.
- How long does the promotion last? For any promotions, ask how long is the 0% APR period, and what is the ongoing interest APR? Look for a card that gives you enough time to pay off your debt during the interest-free period.
- Penalties? Find out if there is a higher penalty APR that’s triggered by late payments.
4. Apply For the Card That Offers You the Most Value
Once you’ve asked yourself all the right questions, apply! Remember, choosing a new credit card is all about figuring out what your financial needs are and what card works best for you!