Once upon a time there were three, maybe four major credit cards to choose from – Visa, MasterCard, American Express, and Diners Club, which was a rather obscure card created mostly for people to use in restaurants and not honored by many merchants. Even American Express cards were not widely accepted, especially if you shopped overseas. Today, by contrast, there are literally thousands of different credit cards, including those from dominant companies like Discover and Capital One. Picking the right one for you has become the biggest challenge for many consumers.
The choices can be overwhelming because the specific features, benefits, limitations, rewards programs, fees, and other aspects of each particular card are numerous but can vary wildly from one card to the next. The good news is that by narrowing down the field – which can be done quite easily if you follow a step-by-step process – you can find the ideal credit card to meet your financial needs and support your individual spending patterns and cardholder preferences. You can actually locate the card that is tailor-made for you, within as little as one hour, and then complete an online application and have it en route to your home or mailbox before the end of the day.
Here are 10 steps with useful guidelines, and if you simply to follow them it will make credit card selection easy, quick, and well-informed.
1. Evaluate your eligibility.
Before you shop for a credit card, check your credit report and FICO score to find out how banks will rank you. If you so-so credit you’ll want to shop for cards you have a better likelihood of being accepted for; if you have excellent credit you can shop for any card out there; and if you have poor credit or no credit history then look for cards that cater to those who want to establish, rebuild, or improve their credit.
2. Decide between prepaid and full-featured plastic.
Those who don’t have strong enough credit history to qualify for a full-fledged credit card still have options. You can apply for a prepaid card. These work essentially like credit cards and the majority of them are affiliated with Visa or MasterCard so they are widely accepted by online and offline merchants. The hitch is that you have to deposit money into your account before you can make purchases against that amount of money. If a prepaid is the kind of card for you, then you can skip the rest of these steps and simply choose a card with the lowest, most affordable fees and the best benefits.
3. Analyze your spending habits or goals.
Next, consider your spending habits and the ways you intend to use the credit card. Do you need to carry a balance? If so, you’ll want a card with a low interest rate. If you plan to do a cash advance, you’ll want a card with low rates and fees for those – and if you want to transfer a higher-cost balance from another card you have, look for a card with a special balance transfer introductory offer.
If you mostly buy gasoline with your plastic, consider getting a gasoline rewards card that offers discounts on gas. Those planning a trip might prefer an airline travel rewards card, while someone who just wants to save money can opt for a cash-back rewards card. There are a dozen or more different categories of cards that each cater to the spending patterns of a particular kind of consumer, so knowing how you will use the card helps you know which type of card to select.
4. Select or eliminate borrowing features.
Cardholders who do not plan on borrowing cash using a cash advance or convenience check feature can strike that feature off their list. Similarly, if you never intend to carry a balance but will instead pay the card off every month, you do not have to be so concerned about the annual percentage rate which is charged to cardholders who do carry a balance. But if you want to carry a balance or transfer one from another card, shop around for cards that offer low or zero introductory interest rates and low transaction fees for that kind of card use. Some allow you to pay a small one-time fee and then transfer a balance, but pay no interest on the balance for six, 12, or even 18 months. That’s a good card if you want to transfer a more expensive balance and can then pay it off during the attractive introductory rate period.
5. Pick a rewards or non-rewards card format.
One you understand how you’ll use the card you can decide if you want a rewards card – like those that offer cash back, discounts on purchases, VIP perks, and similar treats. Otherwise, if rewards programs are not that important to you, then you can skip those and just look for the most affordable credit cards that do not offer rewards programs. Oftentimes you will find that these cards that don’t have rewards programs excel in other ways, by offering a low interest rate, no annual fee, no foreign exchange fees, or the ability to qualify for the card even if you don’t have perfect credit.
6. Choose a rewards category to match your card use.
If a non-rewards card is your preference, skip this step. Otherwise, study the rewards cards categories, looking for those that match your lifestyle. If you are a frequent flier on a particular airline, a card that rewards you for flying on that carrier is a smart choice. But if you fly often on different airlines, find a card that lets you redeem rewards for any carrier. The same goes for hotel, cruise line, and other travel rewards cards. If a rewards card saves you cash back at restaurants but you don’t eat out often, dismiss it. Maybe a card that rewards you for grocery shopping is better suited to you. In that way, examine rewards categories that line-up with your typical purchase habits, and select cards that will serve you the best, for the kinds of card use that is typical for you.
7. Do you need a personal or a business card?
There are credit cards especially designed for businesses, and they typically provide features that a business owner will find helpful – such as free monthly and quarterly expense reporting, the ability to issue cards to employees and track their expenses, or features to assist with filing taxes. To apply for one of these cards, you will likely have to submit a credit application that includes information about your business and how it is incorporated. Business credit cards offer fewer federal consumer protections, but can be very handy for helping manage business purchases and monitoring expenditures. But if you don’t need those then don’t bother with a business-oriented card, and just go with a type of plastic geared toward the individual consumer.
Whether you shop for a business or a personal credit card, the perks, benefits, and features will fall into essentially the same classifications and categories. There are rewards cards, cards that let you transfer a balance, and the other kinds of cards previously mentioned under each of the two broad categories.
8. Narrow it down to 4 cards.
Now you have answered specific questions for yourself to put thousands of different possible credit cards through a funnel and wind up with more specific and targeted parameters. You know what you don’t need, and you have identified which kinds of plastic you do need and want. Armed with that knowledge you can create a list of a dozen cards that offer the kinds of features you are interested in, and then dig into the smaller details to further narrow the possibilities to just four “top contenders” that work best for you.
9. Compare their Terms and Conditions.
Since you have made the selection process easier, you can now invest some time to study the small print on the credit card offers, benefits, and any associated rewards programs that may be applicable. Visit the card’s website or review their mailed, printed offer, and look for a section titled “Terms and Conditions.” That’s where federal law requires card companies to clearly state important facts such as the interest rate, fees for particular kinds of transactions, charges and penalties for such things as a late payment, the annual membership fee if there is one, foreign transaction fees if those apply, and other details. Using this critical information you can compare the top contenders on your short list to see which ones are the most user-friendly and affordable. Rank your “top four” cards based on which one is best.
10. Examine rewards programs and other perks.
Last but not least, do a side-by-side comparison of any unique cardholder perks and benefits – such as purchase protection, auto rental insurance coverage, or discounts if you shop with stores that partner with the card company. Then examine the rewards or cash back programs if there are any, to see which one delivers the most generous and useful value. By the time you’ve finished doing those comparisons, you should be able to rank the cards on your list one last time, to know which one is best and which ones win a runner-up position. If you need just one card pick #1, and if you need more than one card you’ll have three others to choose from in your final selection process.
Now that you have narrowed down your choices and found a card that is right for you, all you have to do is fill out a credit application and you should be all set and ready to go. If you decide that you want more than one credit card, just follow the same 10-step procedure. No matter how many cards or what kinds of cards you are in the market for, this easy formula should work really well every time.