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Credit cards can offer a convenient way to make purchases or cover expenses. Some even make spending more rewarding by offering cash back, points, or miles on the purchases you make. The average person has approximately three credit cards and 2.4 retail store cards, according to Experian. But when it comes to choosing a credit card, quality is more important than quantity. Different credit cards have different benefits and drawbacks, and what’s ideal for one person may not work as well for another. Knowing how to choose a credit card can help you find one that matches your spending style and needs. Beyond rewards, it's important to consider the card’s annual percentage rate (APR) and fees as well as other card benefits. Here are more of the specifics about how to find the perfect credit card for you.
Check Your Credit FirstReviewing your credit history is an important first step when you’re choosing a credit card. Banks and credit card companies can check your credit reports and credit scores to decide whether to approve you or not. If you are approved, your credit scores may influence the interest rates you'll pay for that credit card. You can get copies of your credit reports from each of the three credit bureaus (Equifax, Experian, and TransUnion) through AnnualCreditReport.com. Once you have your credit reports, review them for:
If you spot a credit reporting error, you can dispute it with the credit bureau that's reporting it. All three credit bureaus allow you to initiate disputes online. As for your credit score, AnnualCreditReport.com doesn't offer access to that. But you can check your FICO score for free with Experian. VantageScores, credit scores created by the three credit bureaus, are also offered for free through select partners. Credit card companies may use credit score ranges to assess who qualifies for individual cards. For example, here's how FICO credit score ranges work.
- Negative items, such as late payments, that could be lowering your score
- Errors or inaccuracies
- Potentially fraudulent activity
Checking your credit scores against these ranges can help you narrow down your list of likely options for choosing a credit card.
- 800-850: Exceptional or excellent credit
- 740-799: Very good credit
- 670-739: Good credit
- 580-669: Fair credit
- 300-579: Very poor credit
Know What You NeedIf you're wondering, what credit card is best for me? consider what you want the card to do for you. For example, are you interested in:
If you're focused on earning points, cash back, or miles, then it makes sense to hone in on rewards programs when deciding how to pick a credit card. But if you're trying to build or rebuild credit, then your options may be limited to secured credit cards. Opening a secured card requires a cash deposit that often doubles as your credit limit.Or you may simply want to keep your interest charges to a minimum. This is where it's important to consider your payment habits. If you think you'll carry a balance from month to month, then a card with a low purchase APR can help you save money on interest. On the other hand, if you're confident you'll always pay your monthly bill in full, you might consider a card with a higher APR if it offers more perks and benefits. You might also look at a charge card. With a charge card, you pay no interest because you're required to pay the balance in full each month.
- Building or rebuilding your credit history?
- Earning cash back on purchases?
- Accumulating points or miles that you can use toward travel?
- Making a large purchase at 0% interest?
- Transferring a balance at 0% interest?
Dig Into Card DetailsOnce you've determined which type of card you need (i.e., rewards, secured, or low interest), the next step is to compare what's available in the category you’ve chosen. Again, you'll want to look for cards that correspond to your credit score range. From there, you can view the details and ask some key questions.
What to Consider for Rewards Credit CardsIf you're interested in rewards credit cards, you'll likely want to know:
If you're looking for a travel rewards card that earns points or miles, you'll also probably want to look at whether rewards can be transferred to travel partners. For example, some travel rewards cards allow you to transfer miles or points to select frequent flyer or hotel loyalty programs. That can help you get more mileage from your rewards, so to speak.
- What type of rewards the cards earn
- Whether rewards are tiered or applied at a flat rate
- What limits, if any, apply to the number of rewards you can earn each year
- Whether an introductory rewards bonus is offered and what's required to qualify for it
- How rewards can be redeemed and what rewards are worth at redemption
- Whether rewards expire
What to Consider for Secured Credit CardsWith a secured credit card, you'll probably want to find out:
Some secured credit cards offer rewards, but not all of them do. So if you find a card that allows you to earn cash back, miles, or points while building credit, you might consider that an added bonus.
- What minimum deposit is required
- What the maximum security deposit allowed is
- Whether your deposit is refundable
- Which credit bureaus the card reports account activity to
What to Consider for Credit Cards That Can Help You Save on InterestWhen you want to choose a credit card to save on interest, you might want to look at:
If you're planning to make a large purchase or transfer a sizable balance, then you might want a card that offers a longer introductory APR window. Just be sure you understand when the introductory period ends and what the new APR will be in case you're still carrying a balance at that point.
- Introductory APR pricing for purchases and balance transfers
- Regular variable APR for purchases and balance transfers
Weigh Costs and Benefits When Choosing a Credit CardWhen deciding how to pick a credit card, it's important to understand how much value you really stand to gain.
Look at Both Rewards and APRA card that offers a generous rewards program might look appealing, for example But don’t forget to consider how much you might pay back in interest if you carry a balance. A high APR could eat away at the value of any rewards you earn.
Check Out How You Redeem RewardsHow you redeem rewards can also determine how much bang you’ll get for your buck. Redeeming cash back for a statement credit, for example, might offer more value than using rewards for gift cards or online shopping. And with travel cards, you're typically better off using miles or points for flights, hotels, and other travel expenses rather than other redemption options.
Consider Perks vs Annual FeesAnnual fees are something else to pay attention to. While some credit cards have no annual fee at all, others can have annual fees that add up to several hundred dollars a year. These cards may offer premium perks, such as airport lounge access, annual travel credits, or elite status in hotel loyalty programs that can help offset the fee. But consider how likely you are to use those kinds of benefits or any other benefits included with a higher annual fee card. A different card with a lower annual fee could make more sense, even if it means sacrificing a few perks.
The TakeawayFiguring out how to pick a credit card shouldn't be hard. Choosing a credit card basically comes down to knowing:
Ultimately, the credit card that's best for you is the one that offers the best combination of benefits and costs—and that you can get approved for.If you’re looking for a place to start, Lantern’s Credit Card Preview tool can help. The tool lets you input information like what you want from your card, your credit score, and your zip code, and provides you with potential options to consider. That way you can get a range of options that are targeted to your wants and needs.
- What you need from a card
- What you're willing to pay for a credit card
- Which cards you're most likely to qualify for, based on your credit history
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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About the Author
Rebecca Lake is a freelance writer specializing in personal finance, investing and small business. Her work has appeared online at U.S. News and World Report, Forbes Advisor, CreditCards.com and Investopedia. Rebecca writes about a variety of topics for SoFi, including budgeting, saving money and student loans.