How to Choose Your Next Credit Card

3 min read
March 15, 2016

How to Choose Your Next Credit Card (1)

A credit card can be one of the most useful tools you have in your wallet. But with so many different options in the marketplace, how do you know that the one you're using is the right one?

If your current card is not getting the job done, choosing your next one will require some research and a solid game plan. So as you search for your next credit card, here are a few things you should consider:

When You Choose a Credit Card, Start with This Number

The first thing to look for when you choose a credit card: the interest rate. Even if you plan to pay your credit card off in full and on time each month -- and therefore, won’t be charged interest on your balance -- it’s smart to look into this number.

There’s no way to know whether or not you’ll ever have a situation where you do carry a balance on your card for a little while, so the interest rate is important. A lower rate will save you money if interest is ever charged.

When you compare the interest rates of all the cards you’re considering, make sure you look at how long that rate lasts. Some cards offer low interest rates to attract customers, but the rate jumps later after the introductory period.

Don’t Forget About Fees

Also, be on the lookout for annual fees. Many cards have no annual fees, but other cards can run you several hundreds of dollars in fees to carry the card. Those cards may provide additional benefits, so be sure to read all the fine print to see if it’s worth it for you.

The Best Options for Your Situation

Depending on your career and lifestyle, your credit card can offer some serious incentives. Frequent traveler? Look critically at the frequent flier options. If you’re more of a moderate traveler, it could be worth it to look into cards with a solid cashback program as opposed to flight miles.

Some cards give 2 percent back on all purchases, while others give a slightly higher percentage back for specific purchases. Take a look at your spending history and use that to dictate which cards would give you the most bang for your buck.

Need comparison help? Take a look at NerdWallet, Mint, or Magnify Money. All of these sites offer comparison tools to help you choose a credit card based on your unique specific situation.

Note that these sites make money when you sign up for a card through their site -- and XY Planning Network has no affiliate relationship with any of these outlets. The rankings and comparisons are extremely useful when you’re shopping around, but it’s important to understand what happens when you apply for a card directly through one of their links.

Credit Card Red Flags

When looking through credit cards, it’s important to know what to look out for an avoid. Here are some of the big red flags to be aware of:

Very low APRs: Card companies will offer very low APR’s to draw in customers, so make sure you check into if/when those rates will give way to much higher percentages.

Excessive fees: Everything could look great on paper, but if you read more into it, how many fees will this company charge you? Between annual fees, maintenance fees, and activation fees, you could be getting more than you bargained for.

Lack of a grace period: Most credit cards will give you some time after a purchase before the interest fees begin. Make sure that the card you’re considering offers that grace period.

With responsible use, a credit card can be one of your best financial tools. With a thorough comparison, you should be able to find one that will give you the best return on your spending.


Heather SwickAbout the Author: Heather Swick is an author, freelance writer, and editor who has worked for news outlets, national magazines and blogs. She is driven to help others achieve their career and financial goals and share her own experiences along the way.