Today, the credit card market is over saturated with products from credit card companies, seemingly every bank, and even most major retail stores. Not to mention, many of these companies offer more than one type of credit card. Some offer cards that get rewards, some that don’t have late fees, and even some that are just a line of credit with their logo. With so many options, it can be confusing and intimidating to select the correct card to keep in your wallet. Here are some factors to remember when trying to select a card.

Your Credit

     The first thing to consider is your own credit. Do you know where you stand? Most major banks are looking for a credit score of at least 640. Many require higher scores, some may accept lower scores, but generally speaking your score should be above 640 as a minimum requirement to qualify for an unsecured credit card. Also, the rate you receive is often tied to your credit score, so the higher the credit score, the lower the interest rate or vise versa. Plus, it is typically required that you can prove some form of income so that whichever company issues you a card will be confident in receiving payment.

     If you find that your credit score is not high enough, look into a secured credit card option. A secured card allows you to put aside a certain amount of money, usually at least $500, into a savings account or time deposit / CD that will gain interest. While your money is put away, you are issued a credit card based on the amount of money you put away. This is a great way to build credit if you have none, or to rebuild poor credit and many of my clients have seen their credit score get well above the 640 mark in less than a year using a secured credit card.

Rate and Fees

     After you have decided whether to go with a secured or unsecured card, it is very important to look at the rate and fees the financial institution will be offering. This can be a tricky area to navigate because most companies offer a promotional rate and no annual fee for the first 12 months and can make the card look better than other cards on the market. The problem is the promotional rate is typically ONLY on purchases so if you cash advance from the card or balance transfer from a different card, it will likely incur a high interest rate on those balances. Another trap to watch out for is if you make a late payment, some cards will instantly put you with the highest rate and in some cases retroactively charge you interest for previous months.

     Many cards offer no annual fee but typically offer less to you in way of rewards than a card that has an annual fee. The key here is to figure out what the biggest offer of the card is, for example, if a card with an annual fee of $125 also offers you a free companion flight per year when you purchase your own flight, then that $125 is often far less than your companions flight and you would benefit from the card. However, this assumes that you fly at least once a year. If that’s not the case, the no annual fee option may be better for you. Another fee to look out for is when you fill out the application; there is usually a section that allows you to select the option to go over your given credit limit and be assessed a fee that is often above $30. This is similar to over-drafting a checking account and I typically advise my clients not to allow themselves to go over their credit limit.

Promotions and Points

     With such a competitive credit card market, most companies will offer you some form of promotion to entice you to join them. While some promotions are not worth what you receive, many promotions can prove beneficial if you make sure you know exactly what you are signing up for. For example, if you go to a major clothing store at a mall, upon checking out of the store the sales clerk will often ask if you have their store’s credit card. If you say no, they will offer you the card and say that you get 5% or 10% off today’s purchase. In most cases I would say it’s not worth the extra credit line, however if you are making a large purchase that you are already able to pay off it may be worth the discount keeping in mind that you may never get the discount for using the card again and be subject to high rates if you do use it again. Another promotion that is becoming popular is a credit card that does not penalize you if you pay late. This is very beneficial for people that do find themselves in situations that may prevent them from paying on time because the credit card company won’t raise your rate or charge a late fee. However this type of card is usually not tied to any other benefits for use.

     The most popular promotion today, is a points promotion. This works by making purchases on your card and the credit card company awards you points based on the dollars you spend. Most base points come out to 1 point for every $1 spent, but most major card companies have partnered up with retail stores so that you can earn even more points per dollar spent. This applies both to in-store purchases and online purchases, though in many cases you will get more points per dollar shopping online. So be sure to research the points program to make sure you maximize your point earnings. Once you have points accumulated, you can log in to a website connected to your credit card company and redeem the points for anything from a flight to an iPad and many things in-between. Another form of gaining points is by getting a card through an airline and accumulating miles with the airline which is great if you use that airline a lot. If not, I advise my clients to use a card that offers points not miles so that you can purchase a flight but aren’t tied to one airline.

Ease of payment

     An often overlooked aspect of getting a card is the ease of payment. If you get a card through your current financial institution, often times they will allow you to link the card to your online banking account so that you can see your balance and when payments are due while you are logging into look at your bank account balances. This is a seemingly small detail that many people don’t think of till they get hit with a late payment charge. Plus for those people who do not like paying bills online, many banks allow you to walk in to a brick and mortar location so that you can pay in person.