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When it comes to choosing a credit card, there is no one-size-fits-all answer. Everyone's needs are different, so the best card for one person might be a terrible fit for another. Finding the best card for your needs is a lot like finding the perfect pair of shoes—you have to identify the primary purpose of the card, and you need to find a card that best suits your own personal style.
If you are shopping around for a new credit card and are overwhelmed by the dizzying array of options out there, follow these steps to help you figure out which cards are right for you:
1. Check Your Credit Scores and Reports
Before you apply for a credit card, you should know your credit history and how lenders view you. Start by looking at your credit scores. You can check them regularly and get alerts of changes in your FICO® Score* with an Experian CreditWorks membership. You may also have access to your credit scores through your existing credit cards or bank accounts. Check with your issuer to see if they offer them for free.
Your credit scores will typically fall in a range between 300 and 850. Typically, score ranges are categorized as exceptional, very good, good, fair or poor. Most credit cards will disclose what type of credit category is required for approval, so it's important to know your scores in order to understand what kinds of cards you might qualify for.
Once you've checked your credit scores, you should also pull up your credit reports from each of the three credit bureaus to identify if there are any errors dragging your scores down or what you can do to improve your scores if necessary. You can get your Experian credit report for free here on Experian.com and can also visit annualcreditreport.com to access free reports every 12 months from each of the credit bureaus.
Here's a quick guide on which cards might be best based on your needs:
2. Decide if You Need a Credit Card to Build or Improve Your Credit
You can find starter credit cards—often marketed to college students—that are easier to qualify for with a limited credit history, but they will generally come with higher interest rates. Secured credit cards, however, require the user to put down a refundable security deposit that acts as collateral to back up your credit line.
The cards are perfect for users with poor or limited credit history because they are not difficult to qualify for and help consumers establish a track record of making payments on time. People who manage starter or secured credit cards typically graduate with a traditional credit card.
3. Ask Yourself if You Plan to Carry a Balance
If you know that you will sometimes carry a balance from month to month, you will want to find a card with the lowest interest rate you can qualify for. While many cards come with plenty of frills, the most important consideration if you need a card for emergencies or if you think you won't be able to pay off a balance right away is the card's annual percentage rate or APR. Some cards even offer a 0% introductory rate that is applicable for the first few months of owning the card.
4. Determine if You Need to Make a Balance Transfer to Help Pay off a Debt
There are plenty of cards well suited to consumers trying to consolidate debt or pay off an existing balance. Many balance transfer cards offer low or even 0% APRs for an introductory period, typically anywhere between six and 18 months, that can help you save money while you pay down your debt. (You will most likely have to pay a balance transfer fee, though, which is typically 3% to 5% of the transfer amount.) However, if you have fair or poor credit, you may have a more difficult time qualifying for the best balance transfer offers.
5. Decide if You Want to Earn Travel or Cash Rewards
If you pay your balance off in full each month, then you might want to take advantage of a credit card to earn rewards in the form of cash back or points for travel purchases. Rewards cards almost always come with higher APRs, however, so being able to pay off your balances is a necessity in order for such cards to be worthwhile. Otherwise, what you will pay in interest charges will wipe out any rewards you might earn.
6. Shop Around for the Best Value
Now that you have figured out which type of credit card might be right for you, you'll want to shop around to find the best credit card in that category. You'll want to ask different questions and research different features, depending on the type of card you're shopping for.
There are sites you can check out with offers from various credit card issuers. Experian CreditMatch offers many options and by signing up for a free account you can see offers matched to your credit profile and spending habits.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on March 6, 2018, and has been updated.
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.