Things To Look For When Choosing A Credit Card
1. Interest Rate. The Annual Percentage Rate is the amount of interest you’ll incur if you don’t pay off the balance each month. Make sure you can afford the minimum monthly payment if you dont plan on or are unable to pay off the card balance each month.2. Fees. Credit cards can come with a lot of different fees. Fees can include:
- Annual fee: can be charged once a year or monthly.
- Late fee: when you dont pay your bill by the due date
- Over the limit fee: when you charge more than the maximum allowed
- Returned check fee: when the form of payment you use does not have sufficient funds
- Balance transfer fee: if you transfer a balance from another card
- Cash advance fee: charged if you take cash from your credit card and
- Expedited payment fee: some cards may charge extra if you want your payment applied to your credit card faster .
3. Rewards4. Introductory Rates5. Where Can You Use It
Choosing Which Credit Card To Keep
Many financial experts say one credit card is all any consumer needs. Yes, its possible to have multiple credit cards and manage them wisely, but ultimately, the typical consumer should be able to get by with only a single card. However, if you happen to make a lot of purchases online or travel, you may want one card for that activity and another card as a back-up. The logic being if your account is compromised and its closed, you have another card as a backup. If you have multiple credit cards and youre wondering which one to keep, you might be thinking youll simply cancel all but one of them. This is actually not recommended once youve got a credit card account open, in most instances, its better for your credit score to keep the account open, but to avoid carrying balances from month to month. Closing an account can negatively impact your credit, for reasons well discuss below.
First, consider keeping a credit card account means that youll keep it active and use it regularly. Other accounts may remain open, but be used infrequently. So while were recommending you keep most of your accounts open, the card you keep is the one you will actually use.
Do You Pay Off Your Entire Credit Card Balance Each And Every Month
No judging here, but be honest with yourself.
- Do you religiously pay every penny of your credit card balance every month?
- Or do you sometimes use your credit card to pay off a big-ticket item or an over budget month over several months?
If you carry a balanceeven sometimeslook at APRs first, then rewards.
This question matters. Because no matter how good the rewards on a credit card, you may save a lot more money by choosing a card with a lower interest rate, even if it doesnt have rewards at all. If you carry a balance from time to time, look for the lowest APR first.
If you can, always use a credit card with a 0 percent intro APR to make big purchases that youre going to pay off over time. If you can repay the balance before the intro APR expires, you wont pay a cent in interestand you might even come out ahead thanks to a sign-up bonus and rewards. Here are some of the best cards with 0 percent intro APRs on purchases.
If youre looking to transfer a balance from one card to a new credit card with a promotional 0 percent APR, dont forget to think about balance transfer fees. Use our balance transfer calculator to see how much you might save, or browse all balance transfer credit cards here.
IGNORE the rewards. Even if you only carry a balance occasionally, the interest you pay matters more than whatever rewards you earn.
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Choosing A Credit Card That Is Best For You
When it comes to how to choose a credit card, its important to consider your financial situation and your spending habits to find the card that works best in your life.
With many to choose from, youre likely to find one that matches your needs. Need help? Give us a call to discuss choosing the right credit card for you.
What Are The Three Credit Bureaus
There are three credit reporting agencies in the U.S.:
Each of these agencies may use a slightly different method of reporting your credit behavior so its not uncommon to have a slightly different credit score with each agency. All three companies serve the same function: to analyze your credit behavior to generate a three-digit credit score used to determine your creditworthiness and in turn, the rates youll be offered on loans like a credit card or a mortgage.
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Pay Off Purchases Over Time Without Interest
If you have one or more expenses that will take you some time to pay back, 0% intro APR credit cards are just what you need. These cards offer a 0% intro APR on purchases.
If you’re wondering how to choose a credit card with a 0% intro APR, look at the length of the introductory APR period. It can last for a year or longer, depending on the card you get. Once it ends, the APR will increase, so you should aim to pay off your full balance by then.
Examine Your Payment Practices
Take a peek at your payment practices to help find a credit card that suits your budget. For instance, if you regularly pay your balance in full every month, a high-interest rate may be acceptable. But one of the best low-interest rate credit cards might be your best bet if:
- You tend to carry a balance
- You need flexibility on payments
- You plan on making a large purchase and want to spread your payments over several months
- You are motivated to pay off debt and minimize interest charges
If the above applies, seek a low-interest credit card offering a rock-bottom rate on new purchases, rather than the typical APR of 18% or higher. There are many options for a low-interest credit card: some cards offer ultra-low interest rates for a limited time but with no annual fee. Others might have an annual fee but boast a regular low-interest rate. There are even credit cards with variable interest rates tied to Canadas prime rate. So how do you choose a low-interest credit card?
Comparison of the total cost of current credit card vs. low-interest rate card over 12 months
This table depicts how much a low-interest credit card can save you overall on interest. Although the current card doesnt have an annual fee, the low-interest card saves you almost half the interest paid over the year, despite its annual fee
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Best Student Credit Card: Bank Of America Travel Rewards For Students
25,000 bonus points if you make at least $1,000 in purchases in the first 90 days of your account opening – which can be redeemed for a $250 statement credit toward travel purchases.
|Earn unlimited 1.5 points for every $1 you spend on all purchases everywhere.|
|INTRO PURCHASE APR||0% for 15 Statement Closing Dates|
|Balance Transfer Fee||Either $10 or 3% of the amount of each transaction, whichever is greater.|
|Foreign transaction fee|
- Pros & Cons:
The Bank of America Travel Rewards for Students is our pick for the best student credit card because of the high earning rate on its rewards program that you can then redeem for all sorts of travel expenses.
It also has a long introductory APR on purchases and no annual fee, which adds to the card’s strong rating. Plus, the lack of foreign transaction fees makes this an ideal card for student travel outside the U.S. Bank of America Travel Rewards for Students also offers excellent credit education and monitoring services.
Unlimited 1.5x rewards on all purchases
Pay off purchases for 15 billing cycles with no interest
Friendly to foreign travel
Rewards aren’t transferable
No 0% APR balance transfer offer
Relatively high spending required for 25,000-point introductory one-time bonus
Best Overall: Capital One Quicksilver Cash Rewards
Earn $200 cash bonus once you spend $500 on purchases within 3 months from account opening.
|1.5% cash back on every purchase, every day.|
|INTRO PURCHASE APR||0% for 15 Months|
|Balance Transfer Fee||3% of the amount of each transferred balance that posts to your account at a promotional APR that we may offer you. None for balances transferred at the Transfer APR.|
|Foreign transaction fee|
- Pros & Cons
The Capital One Quicksilver Cash Rewards card is our best overall credit card and best for cash back because of its combination of low fees, low interest, and high rewards earning rate. With no annual fee, you don’t need to worry about making sure you’re extracting maximum value from the card every year to make it worth it.
The absence of a foreign transaction fee makes this a rare cash back credit card thats worth bringing on a trip abroad and helps make a compelling case that if you’re only going to carry one card, this should be it.
Simple rewards program with a solid return
No annual or foreign transaction fees
One-time bonus is relatively modest
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Take A Look At Your Budget
If you’re savvy with your personal finances, you may already have a budget in place. If you do, you have one of the best tools to understand your spending habits ready to go already. If not, it’s never too late to start budgeting.
A budget is a spending roadmap that you set up to guide where your money goes each month. Contrary to common belief, the point of a budget is not to restrict your spending. It gives you permission to spend a certain amount in each budget category so you don’t spend more than you can afford or more than you want. There are different budget strategies that could work well for you depending on your personality and technology preferences.
Conveniently for credit card users, budget categories commonly line up with credit card purchase categories. Gas, restaurants, groceries, and travel are all common budget categories, and they line up almost perfectly with credit card spending categories.
See Insider’s following guides for the best cards for earning rewards on popular spending categories:
Which Credit Card Is Best For Me: A Quick Look
Need a quick overview of which card could best fit your needs? Heres a quick overview of our general suggestions:.
How you plan to use your credit card
Type of credit card to apply for
|Refinance or consolidate other credit card debt||A credit card that has 0% APR on balance transfers.|
|Get rewards on all purchases||A credit card that has cash back or rewards for every purchase.|
|Build your credit|
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Do You Want To Save Money On Debt
One credit cards nightmare can be another cards recovery. The potential to rack up debt is a key disadvantage of using a credit card. On the other hand, therein lies the promise of balance transfer cards, which can transfer debt from one card to another card with an introductory period of 0% or near-0% APR.
These cards can help you pay down debt faster, but before you take one out, make a payment plan: you want to pay as much debt as you can within the 0% APR introductory period, ideally all of it. Once the introductory period is over, your APR will go up, and youll start paying interest again.
How You Use Your Card Matters
Some consumers use their credit cards like cash but pay their balances off every month in full. Other consumers pay portions of their credit cards which means a lower interest rate is more important. Those who tend to use their credit cards only for emergencies will want to find a credit card that offers low or no annual fee or they will be paying for something they’re not using.
Keep in mind, if you travel frequently, you can benefit from getting a card that offers travel rewards if the restrictions are not onerous. Those who use their credit cards frequently but pay off their balances in full may find a card with cash rewards helps boost their spending power.
When you’re considering your options for credit cards, remember, your financial goals play a role in choosing the right card. You should get a free copy of your credit report before you apply for any new credit cards to make sure there are no errors that could cause you problems. Your Member Financial Representative at Oklahoma Central Credit Union can help you decide what credit cards are best suited for your current spending and savings goals. Remember, credit cards create a new financial obligation and may have a negative impact on your budgeting so make your decision wisely. To learn how to obtain a free copy of your credit report, check out Oklahoma Central’s guide to checking your credit.
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Is It Okay To Have Multiple Credit Cards
Absolutely! Its a smart idea to have more than one credit card in your wallet. Firstly, some retailers only accept select credit card brands, so a backup makes sure youre not left in the lurch. For instance, Costco Canada only accepts Mastercard, so if youre a frequent shopper there, stick one of the best Costco credit cards in your wallet.
Secondly, if you have multiple cards, you can use them strategically to maximize your rewards earnings. For instance, designate one card for travel purchases, another one for drug store and/or grocery purchases, one for cash back on miscellaneous purchases, and so forth. You can never have too many credit cards as long as you use them responsibly and avoid unfettered spending sprees.
Which Credit Card Is Right And For Whom
Listed below are some of the most common types of credit cards available depending upon the various reasons that would push you to buy one. Identify your needs in order to make the appropriate credit card comparison-
Secured credit cards are another option for you if you are willing to work on your savings. These cards allow you to benefit from attractive interest rates against fixed deposits and help you increase your credit score if used carefully.
Another alternative to the similar type of credit cards is the low-interest credit cards that offer a relatively lower interest rate than the other cards of a similar category.
Similarly, Cashback credit cards also offer a specific amount of cashback on the transactions made using the credit card. It must be noted that only a few specific types of transactions would be eligible for a cashback.
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How To Pay Off Credit Card Debt
There are multiple ways to get a handle on your credit card debt. The right one for you will depend on your budget and goals. The debt snowball and debt avalanche methods are two commonly used ways to pay down debt. With the debt snowball method you make the minimum payment on each card. Then you put any additional money you have toward the card with the smallest balance. Instead of looking at each cards interest rate, you focus just on the outstanding balance. The theory is that by focusing on the smallest balance first, youll pay it off quickly.
The debt avalanche method the focus shifts from the smallest balance to the highest interest rate. All extra funds above the minimum payment go to the card with the highest interest rate. Once paid in full, money is then directed to the card with the next highest interest rate.
Other options to help pay down credit card debt include shifting the balance to a card with an introductory 0% APR balance transfer offer, taking out a personal loan or in more challenging circumstances, asking your issuer for help with a debt repayment plan.
Best For Travel: Chase Sapphire Reserve
Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 toward travel when you redeem through Chase Ultimate Rewards®.
|Rewards Earning Rate||Earn 5X total points on air travel and 10X total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards immediately after the first $300 is spent on travel purchases annually. Earn 3X points on other travel and dining & 1 point per $1 spent on all other purchases.|
|Balance Transfer Fee||Either $5 or 5% of the amount of each transfer, whichever is greater.|
|Foreign transaction fee|
- Pros & Cons
The Chase Sapphire Reserve is our best credit card for travel because of its competitive one-time point bonus and high rewards earning rate. Add to that the fact that points are worth 40% more if you redeem them for travel through the Chase Ultimate Rewards portal, and the ability to transfer points on a 1:1 basis to eligible hotel and airline partners.
While the annual fee is high, if you’re an avid traveler, the annual travel credit can help justify it and it has numerous other travel-related benefits if you’re not ready to commit yourself to a single airline or hotel.
Excellent points rewards rate for travel and dining
Premium travel features
Points are worth 40% more for travel bought through Chase Ultimate Rewards
Read the full Chase Sapphire Reserve credit card review.
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