How to Shop for a Credit Card

With hundreds of credit card options, it’s important to pick the right one for your needs. So, how do you choose? There are several items to consider.

How Do You Get Approved?

One of the main factors in getting approved for a credit card is the current condition of your credit. Lenders typically look at your credit score to determine how likely you are to repay any purchases you make or debt you rack up with the card. The higher your score, the better.

What to Consider

There are several items to consider when looking for a credit card. These include the APR, fees, and benefits. You’ll also want to consider what you’re planning to do with the card.

APR (Annual Percentage Rate)

APR is the rate at which interest will accrue on any purchases you make with your credit card that you don’t pay off in full.

Fixed vs. Variable

One of your first questions should be what type of APR a credit card has: fixed or variable. A fixed APR means that the interest rate remains the same during the fixed rate period of the loan.

A variable APR means that the interest rate can change over time.

Low introductory APRs

Some credit card companies will offer new customers a low introductory APR. You often see this when you receive a credit card offer in the mail. For example: “0% interest for the first 12 months!”

These low rates can be tempting; however, after the introductory period – often six or 12 months – the APR will go back to the regular rate, which is typically much higher.

Balance Transfer APRs

Some credit cards will offer a special low interest rate for balance transfers. A balance transfer involves moving debt from one credit card to another to take advantage of a lower interest rate.

Typically, balance transfers will offer a lower interest rate on debt transferred over during an initial period of time. Transferring your balance to a lower interest card can save money in the long run.

Before transferring it, you’ll want to make sure that you won’t lose money once the interest rate on the transferred money goes back up to the regular rate. You’ll also want to make sure there aren’t high balance transfer fees that cancel out your savings.

Fees

We mentioned balance transfer fees, which may be charged when you move the balance of one credit card to another. However, there are many other fees you’ll want to be aware of, too.

  • Annual Fee – a yearly charge for having an open credit card account
  • Cash Advance Fee – a charge for using your card to withdraw cash (i.e. at an ATM)
  • Foreign Transaction Fee – a charge you receive for using your card out of the country
  • Late Payment Fee – a charge for not paying your bill on time

Whenever you’re considering a credit card, make sure you read through the terms and conditions carefully to understand what fees you could be charged and how you can avoid them.

How Will You Use the Card?

What you’ll use a credit card for can also help determine which card is best for you.

  • Daily Expenses– if you’re going to use this for day-to-day purchases and plan to carry a balance on the card, you’ll want to look for a card with a low, fixed APR so you can spend the least possible amount on interest.
  • Paying down debt – If you want to use the card to eliminate debt from other higher-interest cards, you’ll want to look for one with low balance-transfer APRs and low (or no) balance transfer fees.
  • Earning rewards – If you’re not planning to carry a balance and you just want to earn rewards for using a credit card instead of cash, research which rewards are available, and which is most beneficial to you. Rewards credit cards typically offer one of four types of rewards: cash rewards, store discounts, points to buy gift cards, or airline miles.

Choosing a Card

No matter which credit card you choose, make sure the costs associated with the card (such as the APR and fees) don’t outweigh the rewards and any other benefits you may receive as a cardholder.

Aim to pay off the whole balance of the card each month to avoid racking up interest charges and be sure to pay on time so you don’t get hit with late fees or hurt your credit.

The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.