The 20-Something's Guide to Choosing a Credit Card
Choosing a credit card can be quite a commitment. The wrong move could leave you with sky-high interest rates and unforeseen fees. Well, we rounded up our favourite tips for hunting down the perfect piece of plastic. Keep scrolling now to see which cards give you the most bang for your buck.
Many cards offer promotional bonuses as incentives for new accounts. A good cash bonus lands you $100 and a good points bonus will get you 50,000 points. Your spending habits will be a key contributing factor to which card is best for you. If you plan on carrying a balance every month, choosing a card with a longer grace period and low introductory rate is ideal. If you already have a high–interest rate card with a balance, choose a card with no upfront bonus but with a 0% interest rate for 15 or 21 months, and pay off your existing credit cards with the new card.
Some cards require an annual fee simply to keep the card. Limit your search to cards with reasonable fees for things like balance transfers, cash advances, and credit increases. Most likely, you will want to seek out a card with zero balance transfer fees and 0% interest for the first 12 months. Read the fine print and make sure you know of any penalty charges or interest rate increases for paying a bill late or exceeding your credit limit.
Promotions change throughout the year, so check out sites such as NerdWallet and The Points Guy for the optimal time to apply. Interest rates for credit card offers appear as APR, or annual percentage rate. The rate can be fixed or variable, aka tied to another financial indicator, usually the prime rate. Even if you have a fixed-rate card, the rate can fluctuate based on certain triggers, such as making a late payment or maxing out your credit limit. Have a strong sense of your finances and spending habits before taking the plunge. You do not want to carry a balance that is close to maxing out your limit. It will damage your credit score down the line.
Many cards offer rewards programs as an incentive to have you spend more. If you plan on paying your bill in full every month, a killer rewards program is your bread and butter. Look for a program that is flexible to your distinctive lifestyle needs, and start racking up rewards you will actually use. Do you frequent a particular airline or hotel brand? Would you prefer cold, hard cash to points? Keep an eye on limits and extra charges. Be sure to know when rewards expire or if there is a cap to your point earnings.
In case you haven't heard from Samuel L. Jackson's ubiquitous commercials, the Capital One Quicksilver offers the most competitive cash-back program on the market. Believe the hype. Cardholders earn unlimited 1.5% back on every purchase, every day. If you're looking to transfer a balance, Chase Bank Slate offers 0% APR for the first 15 months on balance transfers. The Citi Simplicity card also boasts 0% APR on balance transfers, and no late fees.
Several cards do not charge for foreign transaction fees, but most cards charge 3%. Consider a card with free auto rental insurance while travelling. Dollars to doughnuts, Southwest Airlines Rapid Rewards Visa from Chase Bank is as generous a point system as it comes. In fact, you'll rack up free tickets just for signing up. For travel hounds, the Starwood Preferred Guest from American Express has a long-standing reputation for being the most stellar rewards program around. Earn free hotels and get preferred treatment at a host of locations around the globe.
When it comes to universal points, the most flexible trifecta of cards is Chase Bank Sapphire Preferred, Bank America WorldPoints Rewards, and Capital One Ventura Miles Rewards. All three of these cards offer competetive programs that allow you to trade in points for anything you like, from gift cards to travel or cash. If freedom is you number one, look no further.
Have a tip for choosing the perfect credit card? Tell us in the comments below.
Opening Image: Adam Katz Sinding of Le 21ème