With so many different rewards credit cards out there, it can be tough to make a decision and choose a credit card. After a while, you might start to feel like they’re all more or less the same. But actually, even subtle differences between credit cards can impact your finances, so it pays to get it right.
Here are a few things to consider before swiping right on a credit card:
DO: Take the time to understand your credit history.
Depending on your credit score and history, you may qualify for lower APRs and higher credit limits. Woot! If you have questions about credit cards, or want to talk about ways to improve your credit score, schedule an appointment with a Summit financial expert. They can help you understand the basics and give you tips for managing your credit card.
DO: Factor in the APR.
The APR (annual percentage rate) is the percentage you’ll pay in interest on purchases you don’t pay off right away. According to the Federal Reserve, the national average APR for credit cards is about 15%. This average can help you determine if the APR being offered is high or low. Are you planning to make a large purchase on credit? Try to find a card with a lower rate, so you can minimize the amount of interest you’ll ultimately pay if you can’t pay off the purchase right away.
DO: Consider your own spending habits and lifestyle.
Choose a credit card with rewards tailored to you. If you have a hunger to see the world, consider a travel rewards card, so you can get points for things like airline and restaurant purchases. On the other hand, if cash back is your game, a cash rewards card is a no-brainer. Just keep in mind that some cash rewards cards have higher interest rates, so try to pay off purchases in full whenever possible to avoid paying more in the long run.
DON’T: Choose any old credit card just because it’s convenient.
It’s tempting to take the first offer you get or follow the recommendation of a friend, but you are an individual with your own unique financial history and lifestyle. Do your homework, and weigh all the options listed above. Choosing the right credit card can save you money and give you access to amazing perks, like a card that gives you cash rewards AND gives back to worthy causes around the world.
DON’T: Get caught up on flashy credit card offers.
If an offer seems too good to be true, it might be. When comparing credit cards, consider the fees and APR. For example, it’s common for cash rewards cards to have higher interest rates. If you’re carrying credit card debt, a card with higher interest can cost you in the long run – much more than the cash back perks you would earn. Sometimes low interest and no fees is the way to go.
DON’T: Leave good perks on the table!
Using a credit card is a good alternative to cash or debit – especially if you pay it off every month – because you’ll earn rewards while also building your credit score. Beyond reward points you earn automatically, you may also be able to tap into special offers. For example, Summit offers a student credit card that rewards you with extra points if you maintain a 3.0 GPA. Snagging extra points for something you’re already doing anyway? Gold star!
As with so many things in life, there’s no one right or wrong answer. But if you take the time to understand your financial situation and the options available, you’ll feel much more confident in choosing a credit card.
Ready to start shopping for a credit card? Compare options and find the best credit card for you.
