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Buying guide for Choosing the best credit card

 

Everyone has financial milestones they pass as they move into adulthood, whether it’s the first dollar they earned, the first time they purchased a car, or the first speeding ticket they received in that car. Other than paying the fine for the ticket, those financial firsts tend to generate pleasant memories.

Another important financial first is the first time you’re approved for a credit card. Whether this ends up being a pleasant memory or a nightmarish one depends on how you treat this newfound responsibility. Credit cards require careful management. Use a credit card responsibly and it can be a valuable tool for managing your finances. Use it irresponsibly, and you could end up with a lot of unwanted debt.

At BestReviews, we want to help you find the credit cards that are right for you. Keep reading to learn more about choosing and using these convenient financial tools.

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Some monthly credit card statements show your credit score for free, which can be helpful if you want to see how your score changes over the short term.

Key considerations

The best way to make sure you’ll be approved for a credit card is to apply for cards that match your needs and current credit rating.

Here are some of the different types of cards available:

Secured

For those who struggle to obtain a credit card because of no credit history or poor credit history, consider getting a secured credit card. This type of card requires you to deposit a certain amount of money ahead of receiving the card to guarantee a certain level of credit. Think of it like a prepaid phone card. Some secured cards also provide rewards, such as cash back, just like other cards. Most importantly, this type of card can help you improve your credit history and credit score, perhaps enabling you to apply successfully for other cards in the future.

Low limit

Also, you can consider a student card or a card with a low credit limit. These cards cap the amount you can spend, but they can also help you build your credit history and score when used properly.

Rewards

For those who have an average or good credit score, you can consider a credit card based on the rewards it offers. The best rewards credit card for you depends on the things you like to do. Understand that some cards give you extra perks for the first few months you have the card to encourage you to charge more purchases on the new card. As with any credit card, be wary that you aren’t spending more than you should just to receive the rewards. You could end up with a big balance and monthly interest payments.

Some types of rewards cards include the following:

Cash back: A cash back credit card returns a percentage of what you spend on purchases like a rebate, usually between 1% and 5%. Some cards provide varying percentages based on where you use the card. When using the cash back balance, you might be able to make a discounted purchase on a partner merchant’s website, enhancing the value of the cash back balance.

Travel: With a travel card, you receive points or miles you can use toward hotel rooms, airline travel, or travel packages. Points accrue based on the amount you charge to the card.

Products: Some rewards cards give you points you can use to claim special prizes or products when you hit a certain threshold of spending on the card within a certain time frame. These types of cards were more popular a decade or so ago than they are now.

Low introductory interest rate

Some cards offer a low or 0% interest rate on your balance for a period of a few months to a year. If you’re planning a big purchase, charging the amount on a 0% interest card and paying off the balance before the interest rate goes to its normal rate can save you some money.

Sometimes you can transfer balances from high-interest credit cards to the card with the low introductory rate and save money that way, too.

Retail

While you can use a standard credit card, such as Visa or Discover, in almost any business, a retail credit card only works in the store or business that issued that card, such as a department store. Retail cards may also give you cash back or access to occasional discounts on your purchases at the affiliated store. If you have no credit history or a less than stellar one, it can be easier to obtain a retail card than a standard credit card. You then can increase your credit score and eventually apply for another type of card. Just make sure the retailer reports your payments to the credit reporting bureaus, because not all retail cards appear on your credit report.

"When applying for a credit card, don’t submit several applications at once. Submitting one or two applications at a time gives you a better chance of getting approved."

STAFF

BestReviews

Common mistakes to avoid

When completing a credit card application, some of the questions on the online form might surprise you, or you may not be prepared to answer them. You could end up including some information that isn’t entirely accurate. Whether inadvertent or on purpose, some mistakes on a credit card application can create significant problems when it comes to approval.

Here are some of the most common mistakes people make on credit card applications:

#1 You mistype your personal information

If you make a mistake spelling your name or your Social Security number, you will almost certainly be denied. In the worst-case scenario, you could be charged with identity theft if law enforcement believes the error was intentional.

#2 You enter inaccurate financial information

The application may ask for things like bank account balances, investment holdings, and other loan balances. Provide incorrect information here and you could be subject to accusations of fraud. No card issuer expects you to have these numbers down to the penny, but you should be within a reasonable range of a few hundred dollars.

#3 You enter inaccurate employment information

Credit card issuers expect you to provide accurate information about your current employment and salary. Again, deliberate errors here can result in denial or an accusation of fraud.

Tips

One reason young people apply for and start using credit cards is to help them establish a credit history. Use the credit card responsibly and you’ll improve your credit score, which is helpful for obtaining a mortgage or loan in the future.

  • Don’t apply for too many credit cards. Each time you apply for a credit card, the credit reporting agency receives what’s called a hard inquiry, which reduces your score by a few points. That hard inquiry remains part of your score for a period of a few to several months after the application.
  • Don’t charge up to the credit limit. Your credit card has a spending limit. If you choose to carry a balance on the credit card, it should be no more than 30% of your limit to avoid hurting your credit score. If the balance is less than 5% of the total limit, you can boost your score a bit.
  • Keep older credit cards. The longer you have a particular credit card, the better it is for your credit score. The formula gives you extra points for keeping an account in good standing for a long period of time. Of course, you shouldn’t keep cards open if you’re not using them and they have a high annual fee, but if the card doesn’t cost you anything, keeping the account open is helpful.
  • Have a mix of credit. Having a few different types of credit, such as a car loan, mortgage, and credit card, also helps your credit score.
  • Make payments on time. Using the credit card responsibly includes making at least the minimum payment on time each month. Consistently late payments generate extra fees and a potentially higher interest rate, but they can also hurt your credit score quite a bit. On the plus side, if you only miss your due date by a couple of days occasionally, the card issuer probably won’t report it to the credit reporting agency.
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If you don’t pay off the full balance on the card each month, you will be charged interest on the remaining balance.

FAQ

Q. How do I know if my information is protected and secure on the application?

A. Only submit your personal information on a secure website where you see “https” at the start of the URL and a lock icon near the address bar. Be wary of clicking on a link in an email message to start the application process, because spammers create fake sites to steal personal data. 

Q. How long will it take for me to find out if I’m approved for the credit card?

A. Some credit card companies claim to be able to respond within 60 seconds when you apply through the website. Commonly, though, you can expect anywhere from a few minutes to a few hours for a response one way or the other. 

Q. Do I have to have a traditional checking or savings account to receive a credit card?

A. Not necessarily. Certain types of cards are specifically made for those with no traditional bank accounts. However, the card issuer may limit how you can use the card, or it may be far more difficult to get approved. 

Q. How is a credit card different from a debit card?

A. The two cards look the same, but they operate differently. The debit card pulls funds directly from your checking account when you make a purchase. A credit card is a loan the card issuer makes for your purchases. In other words, the card issuer pays for the purchase, and you then pay the issuer back when you pay your monthly bill.

Opinions expressed here are author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. BestReviews has partnered with CardRatings for our coverage of credit card products. BestReviews and CardRatings may receive a commission from card issuers.