Have you ever seen so many credit card mailing lists, banner ads and targeted emails describing exciting new credit card offers with unprecedented bonuses? The credit card scene is wild at the moment – and many people tend to apply for a credit card for any product emblazoned with the shiniest ribbons.
This is not the way to open credit cards. Strategy and thought must go into the opening of each card. A questionnaire or checklist would be helpful, wouldn’t it?
You are lucky because we made it for you. Let’s take a look at five eternal questions you should be asking yourself, no matter where you are in your credit journey. And yes, they are in order of importance.
1. Are you an impulsive spender?
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Whether you’re looking at your first credit card or your 20th, if you’re making impulse purchases, you should almost certainly No open the credit card you are currently considering.
Credit cards can be a great tool for unlocking some of the most important purchases in your life, such as auto loans and mortgages. But they can also sabotage consumers who don’t have the Churchill resolve to fight debt on the beaches, in the fields and on the streets. Many credit cards may carry interest rates of 25% or higher.
The only exception is when you apply for a credit card with a zero annual interest rate on purchases and/or balance transfers. Such cards can help those who have previously been careless with credit cards to get out of the quicksand of debt they have fallen into.
Read more: The Best Credit Cards for Young People and Newbies
2. What is your credit score?
The answer to this question is very important before you start exploring the credit card market. Depending on your credit score, you may not qualify for the cards you want.
As a general rule, I suggest that you do not apply for rewards credit cards such as the Citi Premier® Card or the Capital One Venture Rewards Credit Card if your credit score is at least 700. can apply with a lower score, but your chances of approval are not the best. And more importantly, a credit score below 700 indicates a credit profile that needs some support.
If you are just starting out in the world of credit, you might want to start with a secured credit card, as these cards are usually the easiest to get approved. By treating your card responsibly, you could very well have a credit score above 700 for a year or so, and you’ll be ready to apply for bigger and better things.
Read more: What credit score do you need to get approved for a credit card?
3. What rewards would you like to receive?
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There are several different types of credit card rewards, from cash back to transferable points, airline miles and hotel points.
If your only goal is to get cash back on purchases, you’ll narrow your search to cash back cards (like the Citi® Double Cash Card). If you prefer free hotel stays, consider hotel credit cards (such as the Hilton Honors Surpass card from American Express) and flexible points credit cards (such as the Chase Sapphire Preferred® card).
Your earning preferences may change from year to year. You can reset the card when your preferences change. Think of the credit card as your employee. You want him to work hard for you. If he does not bring you the expected profit, call him to your office, fire him from his job and find a replacement. Or, even better, just call the bank to downgrade it to the no-annual fee version (if possible), save it, and just use it periodically to build your credit history.
Read more: Best reward credit cards for April 2022 – get more bang for your buck
4. What benefits are important to you?
This is where your lifestyle really comes into play. Are you a traveller? Road Warrior? Homebody? Student?
There is a credit card that offers permanent benefits for everyone. Here are some examples:
- If you frequently fly with American Airlines, you may need a Citi® AAdvantage® Platinum Select Card. It offers one free piece of checked baggage for you and up to four accompanying persons per booking. This benefit alone will save you $60 per person for the round trip.
- If you’re a truck driver, you’ll benefit greatly from the Citi Premier® Card, which offers 3 Citi ThankYou® Points per dollar at gas stations. You can redeem this for 3% cash or transfer points to various airlines and hotels to get better deals on cheap flights and hotel stays.
- If you pay for cell coverage, you can open Wells Fargo Active CashCM Card that comes with automatic cell phone protection, up to $600 per claim (max two claims per 12 month period) by simply paying your phone bill with the card. There is a deductible of $25, which is very little.
- If you travel a lot for work, the Chase Sapphire Preferred® card gives you benefits like primary rental car insurance (potentially saving you $10+ per day compared to your own rental agency). You will also receive travel delay insurance that can reimburse you for food, lodging, etc. in the event of a flight delay. These benefits have saved me several hundred dollars during my travels.
Read more: How to choose the right credit card
5. Are you satisfied with the annual fee?
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By now you’ve decided which cards fit your lifestyle and hopefully some of them stand out. Now find a card with an annual fee can be swallowed.
Ideally, your preferred card will not charge you to keep it year after year. But, unfortunately, the cards that provide the best benefits are also subject to an annual fee.
But don’t be afraid of the annual fees right away. If you find a card that fits your lifestyle perfectly, it can pay back your annual fee many times over.
For example, the premium version of Capital One Venture X has an annual fee of $395. But every year the card gives you:
- Up to $300 on your statement when booking travel through the Capital One Travel Portal.
- 10,000 Capital One miles (worth at least $100) after each account anniversary.
- Priority Pass airport lounge access with guest benefits (similar membership costs $429 per year).
- Various premium travel insurances.
Even if you are a casual traveler, you can easily get $800 a year from this card. That’s $400+ more than what you pay for the annual fee.
bottom line
Choosing a credit card is far from an easy task. There are so many amazing products out there that it’s easy to suffer from the infamous “analysis paralysis.” But by asking five simple questions (in a very specific order), you can quickly determine which credit cards are best for your financial goals and your unique lifestyle.
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