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How to Choose the Best Credit Card

There isn’t a week that goes by that my mail box or inbox isn’t flooded with credit card offers. I get 0% balance transfer credit card offers, gas reward card offers, travel reward offers, and hundreds more. With all these offers competing for our business, how do we choose the best credit card?

While sifting through credit card offers doesn’t sound like much fun, the good news is there are specific things you can look for to make this task less daunting. The goal is to find the best credit card offer for you, and that all starts with knowing how to evaluate a card offer. The Federal Reserve has a website that can help you navigate the world of credit, but it won’t help you pick a specific card.

So to get you started, we have identified the most important things you should look for in an offer so you can choose the best credit card!

Why Do You Want a Credit Card?

The very first step is to ask yourself why you want a card in the first place. Some want to build their credit. Perhaps you have no credit, limited credit, or even poor credit. If that’s your primary purpose for getting a card, look at cards for people with poor credit.

In contrast, you may be searching for a specific type of reward card, such as cash back, points, or miles. If so, you can narrow your search to cards that offer these benefits. And of course, you may be in search of low interest cards. Whatever your objective, the key is to understand why you want a credit card before you begin your search. Knowing what you want will save you time and improve the chances that you’ll get a card that meets your financial needs.

Credit Card Fees

It’s important to pay attention to credit card fees. Credit cards come with set fees everybody must pay and potential fees depending on how you use the card. Common fees may include an annual fee to have the credit card, a balance transfer fee, fees for late payments, and fees for exceeding the credit limit of your card. You should make sure you understand how much these fees are, and more importantly, how to avoid them. Here are a few things to look for:

  • With an annual fee, make sure it is reasonable for you. Not all credit cards require an annual fee, however, so it is worth shopping around to get the lowest fee or no fee, especially if you pay off your balance each month.
  • Be aware of balance transfer fees when making a balance transfer. First understand how much the credit card company will charge you for the balance transfer – usually it’s between 3% to 5% of the amount you transfers. There are some cards that offer No Fee Balance Transfers, but most cards charge this fee.
  • Some cards even charge a fee for making a payment over the phone, but this fee is avoidable. As an alternative you can make your payment online or mail your, both of which are free!

Introductory Interest Rates

It’s always important to know the interest the card company will charge. The interest rate is set in part based on your credit score. This means that not everybody with the same card will be charged the same rate. That’s another reason to keep your credit score in good shape. But you must pay particular attention to any introductory rates.

Introductory interest rates are typically low interest rates (often 0%) on purchases, balance transfers, or both that last for a set period of time. These introductory rates can last just a few months, or even longer with some of the Best Offers. But the point is that they don’t last forever. And it’s important to make sure you understand two things: when the introductory rate ends and what the regular rate will be thereafter.

Understand the Rewards Programs

Many credit card offers today come with some type of rewards program. Whether you’re looking for points to redeem for travel, cash back rewards, 0% offers, or some other program, it’s important to understand the terms and conditions of the rewards offer. Many programs offer introductory specials that last for a limited time, for example. Some gas reward programs offer as much as 10% cash back on gas purchases, but only for a limited time.

Whatever the terms are, it’s critical to simply take a few minutes to read through the program so you understand the benefits the credit card offers. Also, consider any bonus offers that might be available. Finding a good bonus offer can be a deciding factor when figuring out which card you should go with.

Credit Requirements

Each credit card offer has some sort of credit requirement for the applicant. You should pay attention to this and only apply for cards you think you can be approved. For example, if a card requires you to have excellent credit, but you know your credit is only fair, then don’t apply for that card. Instead, find a card that is designed for people with fair credit.

Apply for cards that are within your credit range so you are more likely to get approved. Here are the credit ranges you typically see: No/Limited History, Poor Credit, Fair Credit, Good Credit, and Excellent Credit.

Credit Card Issuer

These days the credit card issuer might not be as important as it once was. Most places accept just about all types of cards. However, it might be something you want to consider. When you think of credit cards, you probably think of companies like Visa, MasterCard, American Express and Discover. The question is does it matter what type of card you get? In answering that question for yourself, here are a 3 things to keep in mind:

  1. Visa and MasterCard don’t actually issue credit cards. Instead, they serve as an intermediary between the merchant that accepts credit cards and the bank that issued them.
  2. Discover and American Express act as both the bank and intermediary all in one.
  3. Visa and MasterCard are the most widely accepted credit cards available. American Express is more widely accepted than Discover.

Photo Credit: ShaNeal Robertson via Flickr

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