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Choosing the best credit card for your financial goals can be an exhausting task. However, it’s important to do your research and leverage any tools at your fingertips, such as the best tax calculator and an expense tracker, to make an informed and thoughtful decision.
There’s a myriad of options available, and they’re not all going to suit your needs. Indeed, you probably won’t meet the eligibility criteria for every card on the market, especially if you haven’t had a credit card before. To help you handle the tricky research and avoid adding needless inquiries to your credit history, here are our top five questions you should ask yourself before taking on a new credit card.
Can You Handle the Interest Rate and Terms?
Many people get credit cards with attractive interest-free periods. However, it’s crucial to understand that once your interest-free time is up, those cards come with an interest rate that’s higher than the industry average.
You need to be absolutely certain that you won’t let your credit accumulate through the interest-free period only to be stung with a rapidly accumulating debt once the grace period is up. To do this, you’ll need to create a budget so you can see your income, expenses, and disposable income for every month of the year. Use a tax calculator so you can factor in your tax refund or bill. Getting a clear picture of your finances will help you avoid dangerous credit card traps.
What Is the Minimum Credit Score Requirement?
In most cases, the minimum credit score requirement will depend on the caliber of the credit card you’re considering. Your credit score may also determine the borrowing amount you qualify for and your interest rate.
In general, the average credit score is between 600 and 700, and most lenders offer credit cards in this bracket. If your score is below 600, don’t stress – there are some cards available. They tend to have small limits and strict terms but can be valuable for building your credit rating.
What Fees and Penalties Are Associated with the Credit Card?
Fees and penalties bring in a lot of money for credit card companies, and the less principled lenders can sometimes take advantage of uninformed consumers. To protect yourself, you must look for annual fees, balance transfer fees, foreign transaction fees, late payment fees, and any other fees that may be hidden in your terms of service. Be prepared to question unfamiliar or unexpected charges and know where to go to follow up with your lender as needed.
Will You Receive Any Rewards?
Credit card rewards deliver significant benefits if you know how to take advantage of them. Some cards offer cash-back bonuses, travel bonuses, sign-up bonuses, entertainment spending bonuses, and balance transfer bonuses. Make sure you are fully aware of how to earn rewards, how to redeem them, whether they expire, and if there are any exclusions.
What Is Your Credit Limit and When Will It Increase?
It’s important to have clarity on what your credit limit is to avoid overspending and incurring fees. A misunderstanding of your limit could also lead to credit score deductions, so this is a crucial area of consideration.
To avoid exceeding your limit, turn off automatic or renewing purchases and track your spending in an app or spreadsheet. Ask when your credit limit will increase and what conditions must be met in order for that to happen. This will help you plan your expenses and payments accordingly.
The best advice is to do your own research and make a choice that fits your budget, your finances, and your goals.
