How to Access the Right Credit Card for Your Financial Needs
Credit cards serve as valuable financial tools for individuals looking to establish or rebuild their credit. Making payments on time is usually reported to credit bureaus, which can help improve a credit score. However, missing or delaying payments can negatively impact it.
This guide is intended for those interested in how credit cards work and how to choose one that meets their needs. It outlines the different types of credit cards and highlights key considerations to remember when selecting the best card.
How It Works
With a credit card, a consumer can spend up to an agreed amount, which is indicated as the credit limit.
The credit limit largely depends on factors like the consumer’s income and credit history. However, for individuals with limited or poor credit history, options like credit cards with $2,000 limit guaranteed approval exist, offering a straightforward way to access credit without the usual strict qualification criteria.
Every month, the consumer receives the statement with the date they need to pay it, the minimum amount they must pay, and the total amount they owe, known as their balance.
Paying less than the minimum will add a negative mark to a consumer’s credit file. This means that if someone misses or makes only partial payments, it will show up on their credit history, which lenders often check when considering new applications.
As a result, they may not qualify for other financial products if their history reflects missed or underpaid bills. They could also lose access to the best deals available to consumers. Additionally, late payments may lead to extra fees.
Consumers can ask the credit card provider to set up a direct debit to avoid late payments. This will automatically take the payment from their bank account monthly. It can be set for an amount of their choice, the full amount, or just the minimum amount required.
Types of Credit Cards
There are many credit cards available. Each of these is designed for different purposes.
- Student Credit Cards. Primarily intended to help current students establish and build credit. These financial tools have lower credit lines, and some could offer cash or travel rewards.
- Standard Credit Cards. Ideal for consumers new to credit, standard credit cards typically offer lower credit lines and may offer rewards, depending on the provider.
- Affinity Credit Cards. This card offers consumers travel insurance, emergency services, purchase protection, and product warranties as they showcase their support for a sports team, college, or cause. It may also offer benefits like discounts at an alumni store for college cards or allow consumers to give a portion of each purchase to an associated charity.
- Airline and Hotel Cards. Airline and hotel cards are ideal for travel-related benefits, perks, and rewards. Consumers can earn and redeem rewards with an airline-specific card. The same goes for a hotel card. Often, hotels and airlines partner to offer more benefits to consumers.
- Business Credit Cards. Business credit cards are key financial tools for business owners. Depending on the issuer, these cards can offer travel and cash-back programs for routine costs like office supplies, phone and cable service, or internet service. There may also be programs that allow business owners to add employee cards and tools that make bookkeeping simple.
- No-Fee Credit Cards. Many no-fee credit cards are available for those who don’t intend to use credit cards but may want one just for emergencies. This means consumers won’t have to pay annual fees, even if they don’t often use their cards.
How to Apply for the Right Card
Before shopping for a credit card, consumers should consider these key points to get the best card for their unique situation.
Know What to Compare
The Annual Percentage Rate (APR) is the most important number to consider. According to True Tamplin, a Forbes contributor, APR “represents the total cost of borrowing money, expressed as a yearly percentage.” In addition to APR, one must consider cash advance fees, late payment fees, and annual fees for some cards.
Check Your Spending Habits
A consumer’s spending habits are significant when getting a new credit card. For example, those who travel frequently may consider applying for a credit card that offers more points for travelers. This way, they may even get a free flight a lot quicker. There may also be great lounge perks they can avail of anytime.
Understand the Rewards Program
Consumers must consider the cost of the card and understand the rewards program to ensure they get the best value for their money and enjoy the benefits that work for their lifestyle. This way, they can earn points to claim something they would enjoy, like a restaurant discount or travel perks.
Choose a Local Service
Building a strong relationship with your bank is essential for effective financial management. Choosing a local bank allows consumers to easily seek expert advice from their banker when making important financial decisions. This personalized support is often more convenient than consulting a third-party who lacks familiarity with their financial situation.
Ready to Apply for the Right Credit Card?
Besides reading and understanding a credit card’s features, consumers should also talk with the provider. This means asking the right questions and hearing all the answers from them. You can do that by emailing them or visiting the brand onsite. This way, consumers can be sure of this big financial decision and confidently take steps towards building their credit.
