Choosing the right credit card can be a daunting task, given the multitude of options available. To make an informed decision, follow these four simple steps.
Know Your Credit Standing
Start by understanding your current credit situation. This involves checking your credit score, which plays a significant role in determining the types of cards you’re eligible for. Excellent credit opens up more options, including cards with the best perks, while average credit still offers a range of choices. If your credit is less than stellar, there are starter credit cards designed to help you build or rebuild your credit. You can check your credit score for free through Experian before applying for a credit card.
Consider Your Goals
Your choice of credit card should align with your financial goals and spending habits. To find the right fit, think about your objectives, such as:
Building or Improving Credit: If you’re new to credit or need to boost a poor credit score, consider a secured credit card. These cards function like regular credit cards, but you’ll need to provide a refundable security deposit when opening the account, typically equal to your credit limit.
Earning Rewards: If you want to maximize your everyday spending, a rewards credit card may be ideal. These cards offer cash back, points, or miles that can be redeemed for various rewards, like cash, travel, or hotel accommodations.
Financing a Large Purchase: If your goal is to finance a significant expense that you’ll pay off over several months, look for a credit card with an introductory 0% APR (Annual Percentage Rate) period. During this period, you can pay off your balance without incurring any interest charges.
Saving on Interest: If you’re carrying credit card debt with high-interest rates, a balance transfer credit card with an introductory 0% APR on balance transfers can help you save money as you work to pay down your balance. However, make sure to review the card’s terms for any balance transfer fees.
Use a Matching Service
To simplify the process of comparing different credit cards, consider using a matchmaking service. These tools take into account your credit profile and preferences, curating a selection of top contenders that align with your specific needs. It enables you to compare the terms and benefits of various cards, helping you make an informed choice.
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Apply for Your Desired Card
Once you’ve identified a card that suits your needs, you’re ready to apply. If the card issuer offers a prequalification process, take advantage of it. Prequalification involves a soft credit inquiry, which provides the card issuer with insight into your creditworthiness without impacting your credit score. However, it’s important to note that prequalification doesn’t guarantee approval.
When you’re ready to apply, follow the application instructions provided by the credit card issuer. Typically, you’ll need to provide essential information, including your Social Security number and other identifying details. Be aware that submitting a formal credit card application triggers a hard credit inquiry, which may temporarily lower your credit score by a few points.
Approval for your credit card application can vary. In some cases, you may receive instant approval, while in others, you might need to wait for a decision through the mail. If your application is denied, the lender will provide a reason for the denial. Fortunately, there are steps you can take, such as requesting reconsideration and working to improve your credit for future applications.
In summary, selecting the right credit card requires a systematic approach. Understanding your credit status, aligning your goals with the card’s features, using matchmaking services, and applying wisely will increase your chances of finding a credit card that meets your financial needs and helps you achieve your goals.