Almost everyone knows about credit cards. Yet many people approach them like they offer free money.
The result? They end up in crushing debt.
It shouldn't be this way.
With proper use, credit cards help you establish a solid financial foundation.
If you're thinking about applying for a credit card for the first time or looking for a better one, keep reading.
Follow these steps and to learn how to get the best deal on your next card.
1. Check Your Credit Score
Do you know your credit score? Do you have an idea of what it is?
A recent survey showed that almost 60% of U.S. consumers don't know what their credit score is. Yet your credit score determines everything from the interest rate on your credit cards to whether or not you'll get your next job.
Here's what you need to know: Getting your score is easy.
Despite the catchy jingles you hear on television, there are only a few ways to acquire your credit score. The simple and free way is to get your score from the three major credit-reporting agencies. These agencies, Equifax, Experian, and TransUnion will provide you with one free report each year.
And if you're ever denied for a loan or credit card, you're entitled to a free copy of your report within 60 days.
Here are some other situations when you can get a free report:
- You're unemployed and begin your job search within 60 days
- Your report is not correct
- You're a victim of fraud (including identity theft)
- You're receiving public assistance
After you have an idea of your credit score, its time to figure out what kind of card is right for you.
2. Determine What Type of Card You Need
All credit cards are not created equal.
Some types of cards are great to help repair damaged credit.
Other cards have low interest rates - which you can use to transfer high interest rate balances to ones with lower rates.
And some let you earn rewards - including frequent flyer miles, store discounts, and even cash back.
Improve Your Credit With These Cards
Is your credit score low because you have little to no credit history? Or maybe you've had a series of past financial missteps?
Here's why a secured card may be your best option.
Secured cards usually require a deposit of $200 or more to open, and the credit limits are low.
This makes them easy to pay on time, which improves your credit score.
Are you a student (or have children who are students)? Student cards are another option to consider.
These cards are designed for students with little to no credit history and usually have lower spending limits. These lower limits make them easier to pay on time, which improves your score.
Ready to find the best secured cards?
Eliminate High Interest Rates With Low-Interest Cards
Have you read your credit card statement recently?
You really should if you haven't.
You may be surprised to see how much you're paying in interest every month.
If your credit score is less than perfect but still in the "good" range, a low interest or balance transfer card might be right for you.
Low-interest cards have just that - a low interest rate. A few of these even offer 0% interest for an introductory period.
Accounts with high balances and interest rates can be transferred, saving you money in interest and cutting down the time needed to pay them off.
Earn Rewards With These Credit Cards
Do you pay your balance off each month and you have the great credit score to prove it?
Consider a rewards card.
Rewards cards offer bonuses for responsible spending and customer loyalty.
Examples of rewards include:
- Frequent flyer miles
- Store discounts
- Fuel discounts
- And more.
Use our Guide to Rewards Cards to find the best reward card for your lifestyle.
3. Get The Answers To These Questions (Before Applying)
Are you tempted to skip the fine print and just sign on the dotted line?
Don't - it's not worth it.
Before applying for any card, get the answers to these seven questions:
- How much is the annual fee?
- What happens if I miss a payment?
- Can I reduce my interest rate in the future?
- How long is the initial period (balance transfer cards)?
- How do I earn and use rewards (rewards cards)?
- Do the rewards expire and if so, when (rewards cards)?
- How much is the deposit (secured cards)?
4. Find the Best Benefit to Value Ratio.
What is the value of the offer you're considering?
In other words, identify the features you'll use and that are valuable to you.
Features to look for include:
- Automatic credit limit increases (after several on-time payments)
- No late fees
- No annual fees
- Missed-payment forgiveness
When it comes down to the wire, look at these added value elements to help you make your final determination.
5. Make Your Card Work For You
Being careful in the way you use your card can help reduce your chances of identity theft and credit card fraud.
Unfortunately, being careful is not always enough. However, these tips can help.
Use Secure Websites Only
When using your card online, make sure the website is reputable. Look for "HTTPS" in the URL bar at the top; the "S" on the end means the connection is secure.
Go With Your Gut
Don't enter your credit card number and personal information into a form or website you do not trust. Simply put, it's not worth it!
Avoid Public Wi-Fi
Avoid making purchases over public Wi-Fi networks. These include public networks like those found at Starbucks, restaurants, hotels, and even city parks.
Pay On Time
Missing a payment hurts your credit score, results in penalties, raises your interest rates and makes it harder to pay your debt.
Bottom Line: Do Your Research
Whether you want to improve your credit or transfer a balance or earn rewards, always compare offers and read the fine print.
Good to Know: Before applying for another care, remember that each application leaves a mark (known as a hard inquiry), on your credit report. The more inquiries you have, the lower your credit score, and your chance of approval, will be.
Once you find the card you want, go ahead and apply - then use your new card responsibly.
Your turn! Tell us what you look for in a great credit card in the comments below.