New York (CNN)Choosing a new credit card can be daunting, with so many options to consider. But for most Americans, it's a necessary step to establish credit.
One way he builds his credit history is by opening and using credit cards.
So how do you decide which card is right for you?
The most important factors to consider when purchasing a new card are:
Is your credit score high enough?
Most cards have credit score requirements, among other criteria. Therefore, it is important to determine what the score is and whether it is good enough to be approved.
But what exactly is a good credit score?
Ted Rossman, Senior Industry Analyst at Bankrate.com, states that a good credit score is "generally defined as [as] 740 or above on a FICO scale of 300 to 850." I'm explaining. Your FICO score represents your likelihood of paying off your credit card bill based on previous payments.
His FICO score cutoff for many credit cards is 670, but this is not a hard limit.
"Most people are in the right ballpark for most cards because the average FICO score is 716," he said.
If you want to improve your credit score, it's important to pay your credit card bills on time, keep your balance low, and prove you can manage different types of credit well. Rothman said to do. Long distance. And that can take some time.
"A lot of this is not a sprint, it's a marathon," he pointed out.
For those looking to improve a low credit score or build credit, Rossman offers security backed by his deposits, often held in linked bank accounts. We are proposing a secure card that is safe. This acts as collateral in case you fail to pay your monthly bills.
These cards also have severe restrictions, and cardholders cannot spend more than they have pre-deposited. So if your security deposit is $500, your spending limit will be $500.
What reward does it offer?
There are three main benefits of credit cards: cashback, points and miles.
Cashback rewards pay a percentage of the amount the cardholder spent on the purchase. Accumulated cash is typically redeemed in the form of checks or direct deposits, applied to future balances as statement credits, or sometimes used for purchases.
Points and Miles Rewards Cards allow cardholders to redeem rewards for travel and other goods and services.
Whatever form of reward you choose, you should ensure that you get the most out of your purchase.
Start by thinking about how you spend your money. Some cards offer more perks for spending categories like travel and meals, while others offer better perks for grocery purchases and gas.
According to Rossman, many people prefer cash back rewards because they are easy to navigate and require no tracking of purchase categories. Because there is no He suggests finding a card that offers him 2% cashback on every purchase.
If you're willing to dabble in a variety of cards for more rewards, Rossman has cashback his cards for general purchases and cashback for more specific categories. It is recommended that you stack other cards on top of each other.
"Using something like a [general cashback card] as a floor and guaranteeing that on certain purchases he won't get less than 2% cashback, and spending a lot of money We lean towards the categories we use,” Rothman said.
Beware of Fees
Many banks don't charge anything just for having a credit card, but some loyalty cards usually charge An annual fee starting at $95 is charged. Up to $695 per year.
"In most cases, the better the reward, the higher the annual fee," said David Lord, general manager of Credit.com.
Some of these fees may seem high, but they are worth it if you know you will take advantage of all the perks the card offers.
"These are often travel cards with premium benefits," he says Rossman. "If you plan to take advantage of airport lounges, free checked bags, and other perks, the annual fee may be well worth it, but if you travel infrequently, it's not."
No more. One common fee is the foreign transaction fee. This usually adds him 3% to the purchase price of products and services purchased in other countries. If you travel a lot, you should avoid cards with such fees.
Most cards also charge late fees.
"The first offense is up to $30, and subsequent offenses up to $41 within six billing cycles," said Rossman.
Another important fee to consider is the cash advance fee. But Rossman advises against using credit cards to get cash. "There is a separate fee and interest will accrue immediately at a higher interest rate than a normal purchase."
What is the interest rate?
"It makes sense to ask for 1%, 2% or even 5% cash back (or equivalent airline miles or hotel points) if you're paying. No, high interest rates," Rothman said.
But calculating the interest rate may not be as easy as it seems. Cards often charge different rates for purchases and balance transfers or cash advances.Also, most credit card issuers offer variable rates. This means that it can fluctuate over time.
Many cards offer a 0% referral rate for a period of time. However, cardholders should be aware that rates may spike once the trial period ends. As long as the 0% purchase rate can be a big economic benefit. This is especially true for those who want to make some big purchases early in the semester, such as vacations or weddings, but need a little more time to pay it off.
"You can divide the debt by the number of months left and try to keep it," he says Rossman. "I think this always makes more sense for him than making a series of purchases on the 0% card."
All in all, there's no one-size-fits-all when choosing that new plastic. Instead, it's important to do your research and find what works best for you.
"[The] devil is in the details. Check the details," said Lord.
