Whether you’re applying for your very first credit card or looking to upgrade to a card that better meets your needs, it’s important to research, research, research! With so many good credit cards to apply for, you’re sure to find one, but there are a few factors to keep in mind before you make a decision.
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Annual Percentage Rate (APR)
The annual percentage rate, or APR, is the interest rate you pay any time you don’t pay your credit card balance in full. Many credit cards offer a lower introductory APR, where for the first few months to a year, you can pay down credit card debt with a lower interest rate (or, in some cases, 0% APR). You might also be able to take advantage of an introductory APR by transferring a balance from another credit card.
If you’re paying off credit card debt, this can be a great way to reduce the amount of interest you’ll pay overall. But be careful — if you don’t pay at least the minimum amount due on a bill on time, your APR might revert to the default rate. That will be the highest interest rate charged on that card. You should also try to payoff the balance transfer before the introductory period expires.
The time between when you make a purchase and when the interest begins accruing is called the grace period. You don’t want a card that begins charging you interest the second you buy something! Save yourself the headache and pick a card with a long grace period. Look for one that allows at least 21 days.
The Cost of Keeping the Card
Even if a credit card offers great benefits, you can spend a lot on fees unless you read the fine print. The first fee to look for? An annual fee.
Cards that charge an annual fee often offer better rewards in return, and many of those rewards (like savings on travel) can offset the cost of the fee. If that’s the case for you, you can still save money by taking advantage of cards that waive the fee for the first year. If you’d prefer a no annual fee card, there are many to choose from.
Another fee to look for is foreign transaction fees. If you use your card overseas, the credit card company might charge up to 3% of every dollar you spend. 1 There are so many credit cards available that don’t charge foreign transaction fees, you can easily avoid paying extra when you travel by choosing a card wisely.
One of the best benefits of credit cards are the amazing rewards programs. Your everyday purchases can earn you points, which you can apply toward travel, retail purchases, cash back, and more.
To rack up the most points, pick a card that gives you rewards for where you spend the most, commonly gas stations, grocery stores, or certain shops or online retailers. Just be sure to spend on what you’d ordinarily buy, because spending more just to get a reward won’t save you money in the end.
The best card for you will offer enough of a credit limit to give you flexibility, but not so much that you can get in over your head. Generally, a low-limit card is great for college students who are learning to use credit for the first time. Once you graduate, you’ll likely need a higher limit for larger monthly expenses. And having a higher limit can help your credit over time, because spending a lower percentage of your credit limit each month is good for your credit score.
But know yourself — if you haven’t been super responsible with credit in the past, don’t choose a high-limit credit card that will let you take on more debt than you can pay off.
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Your credit card is something you’ll reach for often, meaning you’ll likely need to call customer service a few times a year. Whether you have a simple question or you just noticed fraudulent charges on your statement, you want to speak to someone confident and competent who can quickly fix your issue. Good customer service, especially with something as important as your credit card, is something to look for. Skip any credit card companies with hard-to-navigate websites, or that make it hard to get a human on the phone when your question is too complicated for the automated phone service.