So, with spring in the air, a person’s thoughts turn to warmth and tossing off the winter doldrums. Spring is full of new-ness and freshness—it’s a time when people start making their lists of things they want to accomplish over the coming months while the weather is accommodating. You know, clean out the garage, get the yard looking nice, apply for a new credit card… Okay, if one of those seems out of place, it’s because this is a financial blog and not a home and garden blog. But look, if applying for a new credit card is on your to-do list, we’ve got a few thoughts that could help you avoid costly mistakes and get just the right credit card for your needs. So put the gardening gloves aside for now and let’s talk credit cards.
The first thing to understand, if you don’t already, is that there are all sorts of credit cards for all sorts of needs. Maybe you want a card that accumulates rewards points like airline miles or cashback. Maybe saving money on interest is your biggest issue, or you might need to improve damaged or limited credit—the right card can help you, so choosing the right one is vital.
How’s your credit?
The place to start is by gaining an understanding of where you stand, credit-wise. Services like NerdWallet can give you free and easy access to your credit score, while many credit card issuers also give cardholders free access to their FICO scores. Additionally, the three major credit bureaus (Experian, Equifax, and TransUnion) sell credit scores.
Of course, the healthier your score, the greater your chances of approval, and the better your potential perks. But if your score isn’t quite what you had expected or hoped, it’s not the end of the world. Your credit report should show what the issues are, and you can then take steps to improve your score—anything from adjusting your spending habits to disputing errors. By law, you are entitled to one free report from each of the three major services per year. These are available at annualcreditreport.com.
Pick a card, almost any card
The next step is to decide what you want to get out of a credit card. Are you building credit? Need to save money on interest? Want to earn rewards? A student credit card or secured credit card is a good way to build or rebuild credit. Generally, these cards require a $200 deposit, which is returned when you close or upgrade the account, but it’s a great way to protect yourself from issues that could damage your credit and build the kind of record that improves scores.
If your credit score is in a good place and you’re more concerned with having a card for emergencies or to help even out irregular income by carrying an occasional balance, you probably want to look for a low interest, and/or 0% APR introductory rate card. NerdWallet offers a handy flowchart for finding the right low-interest card to suit these needs.
And if rewards are your thing, there are cards for that too. Want to save points for travel? Cashback on your purchases? You have plenty of choices to suit your whims, so choose wisely with this handy chart.
Ask the right questions, get the right card
While you probably still have a dizzying number of options available at this point, asking the right questions can help thin the field and present you with a more manageable decision. But the right questions are determined by the right type of card—credit-building, low interest, or rewards.
If you’re building credit, you want to make sure the card will help you do just that. You want to find a card that reports your payments to the credit bureaus. You also want to know about the cost of opening an account and any annual fees attached to the card, as well as if you have the ability to move up to a better card later on. And you want to pay your bills on time!
For those low-interest cards, you want to know how long the 0% APR period lasts. Nothing that good lasts forever, so if you plan on carrying over balances for a while, make sure your rate doesn’t skyrocket after the initial period. Also, look into the card’s balance-transfer policy. The interest rate on transfers may be different than the interest rates on purchases, but this can be a good way to save considerable interest fees elsewhere. You may also want to look into whether your low-interest card offers rewards. Don’t miss out!
And with rewards cards, you want to make sure you get the type of rewards that suit your lifestyle. Cards with annual fees can offset those costs with valuable rewards earnings. If foreign travel is among your plans, look for cards with no foreign transaction fees. You’ll also want to know how complicated the rewards program is and how quickly rewards accumulate. NerdWallet’s rewards valuations chart can be a big help here.
Of course, once you’ve chosen the right card and started using it, the real key is using it correctly. Don’t abuse your spending privileges, spend wisely, and above all, pay your bills! There’s no better way to build good credit than by being a responsible credit card holder, but there’s also no better way to damage your credit than by abusing your card. So be smart, choose well, and be careful out there.