4 Things to Consider When Weighing Credit Cards

Credit cards are like a stick of dynamite: They’re incredibly effective at their intended purpose, but they can blow up in your face when used inappropriately.

When you're in the market for a new credit card, the possibilities seem infinite. Countless banks and credit card companies offer dozens of different deals, and every card delivers distinct terms, rates, and fine print.

No two credit cards are identical, and you should recognize the use case of any card you’re considering. In other words, pick the right tool for the given job.

The prospect of narrowing down your potential choices might seem daunting at first, but you have to choose a card that fits your lifestyle and spending habits. Even the best credit card can be a worthless piece of plastic — or an incredible liability — in the wrong hands.

Before you sign up for a new card, here are four questions to ask yourself:

1. What’s Your Credit Score?

Any reputable credit card company will check your credit score before issuing a card. In fact, many lenders have minimum requirements tied to each card.

For example, cards that offer the best perks and rewards often require at least a good (660-720) or excellent (above 720) credit score. Think twice about applying for premier offers if your credit score is not-so-stellar. A half-baked plan will only lead to rejection and a slightly worse credit score (your score takes a hit every time a lender makes a hard inquiry on your credit report).

Before you ever apply for a card, take advantage of our free credit card finder service to calculate your credit score and find offers that fit your needs.

2. What Are Your Spending Habits?

Once you've narrowed your search to a handful of cards, it's time to determine which ones match your lifestyle.

Consider your spending habits and your level of financial responsibility (be honest!) when looking at terms and conditions.

· If you’re trying to rebuild your credit and don't have a lot of cash to spare, look for a card with no annual fee and a low interest rate.

· If you’ll be using this card for everyday purchases, you probably want one with a solid rewards program and a high credit limit.

· If you intend to only use this card in emergency situations, pick a basic option with minimal fees and a low interest rate.

3. What Interest Rates Are Offered?

Interest rates, or annual percentage rates (APR), are one of the most common metrics you'll see when browsing credit cards. They’re also one of the most important things to consider.

Do you plan to regularly carry a balance between months? If so, seek out the lowest possible interest rate (and ideally a low introductory rate). Most interest rates land somewhere between 15 and 17 percent, though they might be higher if your credit score is lower than you’d like. If you pay your bill in full every month, interest rates aren’t as much of a concern. In that case, you might want to prioritize cards that have no annual fee or a longer grace period.

It's particularly important to note the difference between a card’s introductory rate and regular (ongoing) rate. Many cards entice borrowers with a 0 percent APR, but that low interest might only last for a few months or a year before your rates skyrocket. Look for cards that offer a more reasonable ongoing interest rate, and don’t get distracted by the allure of low introductory fees.

4. What’s in the Fine Print?

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Always, always, always read the fine print before signing up for a new credit card. Everything might look great at first glance, but there could be problems buried deep within the offer that you won’t recognize until it’s too late.

For example, check to see whether or not the card has any restrictions on balance transfers. Some cards charge you a fee to transfer your balance between cards, but the lender often won't tell you about the cost ahead of time. Other cards could have hidden fees for other transactions, such as asking for an increase in credit limit, paying a bill late, or spending beyond your credit limit.

Just when you think you’ve read everything, dig some more. Some cards include sneaky verbiage such as security interest clauses, which allow lenders to repossess items you’ve purchased using their credit card if you fall behind on payments.

Don’t sign up for any cards that levy fees for rewards programs. Countless lenders are more than happy to let you in on a rewards program without any added fees, so be leery of companies looking to make an extra buck.

With thousands of options available, deciding on a new credit card might feel impossible. By narrowing down your choices and considering your most pressing needs, it will be much easier to find a card that's a great fit for you. At the very least, you'll recognize the intended purpose of your handy new tool.

Still not sure what credit card might be right for you? Find the ideal credit card for any situation by using our Credit Card Finder service.