When you are first rebuilding your credit, it can be tempting to jump at any card that will have you. But, after you’ve developed some positive credit history, you can afford to be choosier when it comes to credit card offers. Before you apply for that new piece of plastic, give some thought to all of the following regarding Choosing a new credit card.
1. The APR
The annual percentage rate is how much it will cost you in interest to carry a balance on the card. In many cases, it is a certain set percentage plus prime, which is variable. Try to get the lowest APR you can qualify for, even if you don’t plan to carry a balance on the account. If you are not approved for a low rate at first, you can also call back periodically and ask for a lower rate.
2. The credit limit
With a card that only has a limit of a thousand or so dollars, it’s easy to hit a high utilization rate quickly. This can drag down your credit score. Be careful about limits and try to keep your balance under 30% of what is available. If you feel you can safely manage more credit, ask your credit card company for a higher limit. They’ll have to run your credit again, but, they may extend a higher rate if you have a good history of payment.
3. Annual fees
This is where many cards, especially reward cards, get you. Some cards have fees as high as $100 per year. When possible, look for cards that carry no annual fees. If you are looking at a rewards card that has a sizable fee, do the math to figure out whether the incentives are enough to balance the annual cost. You should also know what fees are charged if you forget to make a payment or if you go over your limit.
4. Rewards and incentives
It’s fun to get paid to spend your own money. Look for cards that offer cash back or bonuses. Ideally, these cards should offer bonuses in categories that you use often and come with no fees. If your card is one that offers different cash back bonuses at different times of year, time your spending to make the most out of your new card. When looking at incentives, you should also assess the requirements. To get some bonuses, you have to put a certain amount of charges on the card within a set period of time.
5. Your spending habits
Look at past credit card bills and your monthly bank records to honestly assess how you spend money. Do you tend to overspend when you have access to new credit? And, do you have a good reason for applying for a new card? If you do not have a lot of financial discipline, it may be best to think twice about getting a new card if there’s not much benefit.
Credit can be a temptation, but, it can also be a handy tool. Access to credit cards can mean more control over when you and how you spend and can give you bonuses like cash back and airline miles. Need some help learning to manage credit wisely? Get in touch with us. At Key Credit Repair, we offer counseling and advice to help you make the most of your financial life.