If you’re new to credit cards, picking out the right one can be an overwhelming decision. There are literally hundreds of credit cards out there, all with their own terms, fees, and rewards. Before applying for a credit card, follow these five steps to ensure you make a sound decision.
1. Check your credit
Before you start looking at different credit card offers, it’s important to know where you stand in terms of your credit score. Your credit score will determine what kind of credit card you’re eligible for, what APR you’ll receive, and what your chances are of getting approved for a card.
While there are many services out there that will tell you what your credit score is, you don’t have to shell out your hard-earned cash. In fact, you can check your credit score for free with CreditSoup®. TransUnion VantageScore — the score that CreditSoup® provides — has the following ranges:
• 781-850: Excellent
• 661-780: Good
• 601-660: Fair
• 500-600: Poor
• 300-499: Very poor
2. Consider which type of credit card is best for you
Once you know your credit score, you can narrow down your credit card options. There are three main types of credit cards:
• Unsecured cards: Unsecured cards are the most common form of credit card. The credit card company issues you a line of credit based solely off your creditworthiness, meaning your credit score and income. If your credit is fair to excellent, you can probably qualify for an unsecured card.
• Secured cards: If your credit score is in the poor or very poor range, or if you have no credit history at all, you might have to start out with a secured credit card. With this option, you put down a security deposit, and that deposit acts as your spending limit. As you make payments, the credit card company reports your activity to the credit bureaus. Over time, a secured card can help build your credit history.
• Student credit cards: If you’re a college student without a credit history, you’re in luck. Student credit cards are designed just for you. Unlike secured cards, they don’t require a security deposit, but you can qualify for one even if you don’t have great credit. Some student cards even allow you to earn cash back rewards on your purchases.
3. Think about your spending habits
Next, think about your spending habits. If you’re only using your card for essentials, and you think you’ll be able to pay off your balance in full each month, you don’t need to worry about the card’s APR. Since you’ll be paying off your statement, you’ll never be charged interest fees.
By contrast, APR is a big deal if you carry a balance. If you’re planning on making a big purchase and think you’ll need a few months to pay it off, you’ll want to look for a card with a low APR to minimize interest charges.
4. Look at rewards
If you have good to excellent credit, you can look for a rewards credit card. Rewards cards offer cash back or points on your purchases. Those rewards can be valuable; you can get statement credits, gift cards, free hotel stays, and even free airfare.
The better your credit is, the better the rewards. For example, the Chase Sapphire Preferred® Card allows you to earn 2X points on dining at restaurants including eligible delivery services, takeout and dining out and travel & 1 point per dollar spent on all other purchases. Plus, you’ll earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards®.
Check out the best reward credit cards to get the latest offers and perks.
5. Establish good credit habits
Once you’ve found the perfect credit card and have been approved, it’s important to set and maintain good credit habits. Make all of your payments on time, keep your statement balances low, and use your card strategically to boost your credit and maximize rewards.
Ready to apply for a new credit card? Check out the best credit cards of 2020.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.