Q: Hey CreditCardGuru, how do I know which credit card is the right one for me? There are many that sound good but which will be best for my habits?
That’s an excellent question and there is certainly no “one-size-fits-all” credit card. For example, a card may have great rewards for the categories you spend, but there are other factors to take into account like cardholder benefits, annual fee, etc. Ultimately, finding the right credit card is a balancing act which takes everything into account.
Here are 5 questions to quiz yourself that will make your choice easier in 2013…
Question #1: How is your credit?
This is the second most important question to ask, because if you don’t have good credit your options will of course be limited. Those with a recent history of bankruptcy and/or charged-off debt may have to start with secured credit cards. If you have those blemishes but they are at least two years old and your credit score today is at least somewhat decent, then cards for fair credit scores might be worth considering.
Question #2: Do you have a tendency to get into debt (or think you will?)
Secondly, this is the most important question. Because if you ever carry a balance the interest costs will almost certainly exceed the value of any rewards and benefits you are getting.
So which credit card is right for you if this is the case? None! You should probably be avoiding credit cards altogether, and instead using charge cards. Why? Because they give you benefits and rewards like a credit card, but the difference is their balance is due in full each month (so there’s no temptation to get into debt). Here’s a comparison of the best charge cards. But the drawback is they require good credit. If that’s not you, I’d recommend secured cards (see question #1).
Question #3: Which type of rewards do you prefer?
As you know, there are credit cards for cash back, points, and airline miles. However the lines between them have become blurred over the last few years, because many offer the ability to covert points to airline miles, cash back to airline miles, and vice-versa.
Whatever you prefer, it’s important to read in-depth reviews for the cards you are interested in, because there are many tricks and traps to be on the lookout for like spending caps/tiers, reward conversion formulas, and more.
Question #4: Are you willing to pay for premium benefits?
The credit cards that charge annual fees are primarily geared towards travelers. If you don’t spend or travel much, then it might not be worthwhile to pay for a credit card with an annual fee.
On the other hand, if you are charging at least $1,500 to $2,000 per month and fly at least once per year, then some travel cards with annual fees might make sense. But which credit card is right for me if I travel? Well that depends on a number of circumstances… where you travel, which airlines/hotels you stay at, and so forth. Compare travel card reviews and hotel card reviews to see if any make sense for you.
Question #5: How important is customer service to you?
Good customer service should be standard for all credit cards, but unfortunately not many provide it. The time and mental energy it can take to communicate with a badly-trained CSR in India or the Philippines can be overwhelming and sometimes, they may not even resolve your issue!
According to JD Power & Associates credit card satisfaction survey for customer service (from last year, 2010, the latest available) the top 5 highest rated issuers are:
(1) American Express (2) Discover Card (3) U.S. Bank (4) Wells Fargo (5) Chase
I’m not a fan of the lackluster rewards offered by Wells Fargo or U.S. Bank, but Credit Card Forum does advertise cards for AmEx, Discover, Chase, and many others.
So which credit card is right for me?
That is something only you can decide. To help get you started, this site has hundreds of reviews to make finding the right credit card a bit easier…