Choosing the best credit cards for your wallet is a strategic way to save money, score perks, and build a strong credit profile. But like most things these days, consumers have a ton of choices when it comes to plastic preferences, which is why it’s important to evaluate your options.
“People don’t realize how much credit card deals change over time, ”said Liz Weston, personal finance columnist and author of“ Your Credit Score. ”
It makes sense to look at your portfolio every year and see which cards you’ve outgrown, and explore other options, she says.
“Our spending patterns change over time, and so the desire for different types of rewards changes as well,” she adds.
Consider the following cheat sheet as your starting point for shopping around for your next credit card.
What they are: Secure cards are aimed at people with bad credit or no credit history. Secure cards work just like any other credit card, except that the consumer must make a deposit equal to the credit limit. Otherwise, the lender would not be willing to take a risk in providing that credit. Limits are usually $ 500 or less, interest rates are high, and there may be additional costs associated with opening the card.
Who they are for: While secured cards are for people who have not been able to prove their credit is accounted for in the past, “it’s not a slam dunk,” says Weston. “People are being turned down for secured cards.” Do a little research when you sign up to make sure you qualify. For example, the terms and conditions may say you won’t be approved if you’ve gone bankrupt in the past two years, Weston says.
The fine print: Some secured cards do not report to all three credit bureaus (Experian, Equifax and TransUnion). Since it’s all about reporting your good behavior to improve your score over time, this is an important question to ask ahead of time, Weston says.
Cash back cards
What they are: Cash back credit cards enable customers to earn money back on their purchases. These reward cards essentially pay back a certain percentage of every dollar spent. “Cash back cards are always a great deal,” said Wayne Sanford, author of “The Real World of Credit.” Just make sure you’re responsible enough to pay off the bill every month or you’ll pay more interest than the cash back rebate is worth, he says.
Who they are for: Cash back cards suit almost everyone because of their simplicity. “You don’t have to keep blackout data and you don’t have to use your points,” says Weston.
The fine print: In general, the purchases you make on the card will result in you earning a 1 to 5 percent cash back bonus depending on the card and your usage, says John Ulzheimer, credit expert for CreditSesame.com. “Cash back can be used as a statement credit, to buy merchandise or gift cards, or paid back to you by check,” he adds.
What they are: “Co-branded credit cards are general purpose credit cards that earn rewards for specific retailers,” says Ulzheimer. So you can use the credit card and collect thousands of loyalty points, but then redeem them at the store with which the card is co-branded.
Who they are for: If you shop a lot at one specific store, such as Amazon or Target, it can make sense to request this type of card.
The fine print: These cards are only worthwhile if the consumer frequently visits that co-branding retailer. Otherwise, the rewards will be lost, Ulzheimer says.
What they are: Store cards are credit cards that can only be used at a store or a chain store (such as Macy’s). You’ve probably been asked by store clerks to request such credit cards 100 times, with the store offering some sort of promotional discount just for applying.
Who they are for: Only the most loyal customers of a particular store, who diligently pay their bills in full each month, will benefit from loyalty cards, according to Ulzheimer.
The fine print: Retail credit cards almost always have much higher interest rates than their non-retail cards, Ulzheimer says. However, store discounts that are only available to card users can still make it good value for savvy shoppers, Weston says.
What they are: Generally, the purchases you make are on one airline credit card will result in earning miles or points, Ulzheimer says. “Those rewards can be used to buy airline tickets, upgrade from coach to first class, or buy merchandise.”
Who they are for: If you’re not flying 25,000 miles or more with one airline, these cards make less sense, Weston says, because it’s hard to rack up enough points for a reward flight or upgrade. Except for frequent travelers, most people are probably better off in a different category of travel reward cards.
The fine print: Make sure you fully understand the introductory bonus miles, says Sanford. “They may give you 30,000 miles, but you may have spent a certain amount within the first three months of having the card,” he says. One more to know: For times when points and miles expire, there are usually ways to keep them alive, Weston says, such as shopping online through the airline’s merchandise portal. “When in doubt, just call and say ‘I want to transfer some points,’ and often you can apply them elsewhere,” she adds.
What they are: Like airplane cards, hotel cards are co-branded credit cards. These cards are tied to hotel rewards programs, and purchases you make with hotel cards result in your earnings that can be redeemed for reward stays at select hotel chains, Ulzheimer explains.
Who they are for: If you’re not getting enough value from an airplane card, look at the hotel card, Weston says. “There are usually no blackout dates, and since hotels usually have a lot of inventory that they don’t sell, you can book anytime,” she says.
The fine print: Hotel cards are generous and usually flexible when it comes to checking in and out of landfills. With some cards, you automatically start with top status, so you don’t have to jump through hoops to get extra goodies, like a welcome pack at check-in or a dedicated check-in line to speed up the process, Weston says. .
Before you sign up for the next credit card offer that lands in your mailbox, think about your credit history and purchase preferences to find the card that will provide you the most benefits for your needs.
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