Key takeaways
- Check your credit score before applying for a credit card, as it can affect your chances of approval and the types of cards you qualify for.
- There are four broad types of credit cards to choose from depending on your goals: credit-building cards, balance transfer cards, low-interest cards, and rewards cards.
- Analyze your spending habits and financial goals ahead of choosing a credit card by reviewing your end-of-year credit card summary or bank budgeting tools. This helps you find the credit cards most relevant to you.
- Familiarize yourself with a credit card’s ongoing interest rates and fees before applying, as these can impact the overall cost of using the card.
There’s no lack of options when you decide you want a new credit card. And when you’re bombarded with mail offers, advertisements, and emails urging you to apply, making that decision can quickly get overwhelming. So if you’re not sure what to look for in a credit card or how to choose the right credit card for your lifestyle, these tips will help you narrow it down.
Your next credit card should be personalized to your needs — because that’s what makes it the right card for you. We’ll help you figure out what perks to keep an eye out for, as well as how to choose between rewards cards and whether the annual fees for them are worth it. Here are the steps to take.
Check your credit score
Before deciding what kind of credit card you should get, it’s important to check your credit score first. Why? Because the strength of your credit score could potentially reduce or expand your options.
The credit score needed for certain cards and credit card issuers varies widely. Most of the top rewards credit cards require at least good credit, but there are also cards for people with just fair credit and for consumers who have no credit or a limited credit history.
You can check your credit score for free before starting your search for a card to help you decide which applications are worth your time. If your credit doesn’t look as good as you hoped, spend some time improving it before applying for a credit card. The most effective and easiest ways to improve credit include paying all your bills on time (or early) and paying down debt to lower your credit utilization.
Even if you have great credit and your pick of the best cards available, avoid applying for too many cards at once. Any time you apply for a new credit card, you’ll incur a hard pull on your credit report, which will temporarily drop your credit score by up to 10 points. Additionally, several hard pulls in a short time could hurt your chances of approval for cards or other loans in the near future.
Decide what you want your credit card to do for you
Once you know which types of cards you can qualify for, it’s time to research options. What do you want a credit card to do for you? You don’t have to choose just one type of credit card either.
Often, there’s a card that can help you fulfill multiple goals, like credit building and earning rewards or financing a new purchase and traveling more. But generally, credit cards tend to fall into certain categories that revolve around specific goals:
Not sure which type of card fits you best? Find out with Bankrate’s Spender Type Tool.
Credit-building cards can help you improve your credit score
Responsibly using any credit card will improve your credit score over time, but some card issuers offer credit cards specifically designed for people with bad credit or limited credit history. They tend to be relatively easy to qualify for.
Look for credit-building cards that offer free FICO credit score access, credit limit increase reviews, and paths to upgrade to a better card. These features are industry standards that help people improve their credit.
Credit-building cards come in a few basic types — most notably secured credit cards, unsecured credit-building cards, and student credit cards.
Secured cards work like traditional credit cards, with one major difference: They require a security deposit when you open the account. Your deposit typically becomes your credit limit and is refundable when you close the card or upgrade to an unsecured card.
Unsecured credit-building cards do not require a security deposit. With no deposit required, lenders typically rely on a consumer’s credit score for approval. As a result, unsecured credit-building cards may be more difficult to obtain than secured cards.
Student credit cards are designed to help college students build their credit. Since most college students have little to no credit history, qualifying for one of these cards is typically fairly easy. The cards often come with lower credit limits and higher annual percentage rates (APRs). However, they may also offer perks and rewards — like the ability to earn cash back — that are not typically found on other types of credit-building cards.
Balance transfer credit cards can help you pay off existing debt
Sixty percent of those carrying credit card debt have been in credit card debt for at least a year, up from 50 percent in 2023, according to Bankrate’s latest Credit Card Debt Survey. And that form of borrowing is one of the most expensive, so you’ll want to pay it off sooner rather than later.
Balance transfer credit cards are an ideal choice to help pay off credit card debt. By transferring debt from one or more cards to a balance transfer card that offers a 0 percent intro APR, you can chip away at your balance without worrying about interest charges. Be sure to have a payoff plan in place before you start, as any balance that remains at the end of your intro APR period will be subject to the card’s regular APR.
If your current credit card has a high interest rate, a good balance transfer card with a low or 0 percent introductory APR can be a lifesaver as you work to pay down your debt efficiently and at a lower cost.