How to choose the best credit card according to your profile

Banks and financial institutions issue different types of credit cards and lure customers with various rewards. Not every credit card has the same rewards, terms, and features. But, which credit card aligns with your own financial goals and needs? You may feel overwhelmed when you search for a credit card. Choosing the right credit card is important when you send an application.

Various types of credit cards

Credit cards available in the market are of different categories-

Cashback credit cards

When you purchase something against a credit card, you will get some cash back. You may also earn statement credits while making deals. However, the way you receive the reward is different for every card. Some cashback cards do not charge any annual fees. But, cards that offer good bonuses and rewards may charge a reasonable annual fee.

If you can afford to pay the monthly credit bill in full, you can apply for cashback credit cards. It is because you get rewarded for the money you spend.

Whenever you use your credit card, you get a cashback offer. For instance, if your credit card offers 2% cashback, and you have made a deal of $100, you will get back $2.

Co-branded credit cards-

Some traditional card providers issue co-branded credit cards, such as airline credit cards or hotel credit cards. So,using these cards, you will earn miles or points with a flight-related program or hotel loyalty program.

Most co-branded cards are internationally acceptable and are products of a partnership between a card issuer and a merchant. The affiliate merchant and the card issuer want to reward loyal customers. One advantage of having co-branded cards is they mostly do not charge transaction fees. As these cards are related to a brand, they are customized to customers’ needs.

Travel credit cards-

When you make travel purchases or other daily deals with travel credit cards, you can earn points or miles. These points are also redeemable for travel-related deals like car rentals, airfare, and hotel booking. These cards also provide some travel-oriented benefits, such as cancellation insurance, trip delay insurance, waived baggage charges, and hotel status.

As a frequent traveller, you can look for premium travel cards, which offer a lot of perks. However, the annual fee for these cards is comparatively high.

Some card issuers allow you to get your points transferred to their partners (such as vehicle rental companies, hotels, and airlines). You can do so at the online portal of the card issuer. After the transfer of points to a loyalty account, you may book travel through the airline or hotel loyalty program.

Reward credit cards-

These credit cards help you gain different types of rewards, including travel miles and cashback. So, every time you use the card to make purchases, you will gather points. Depending on the type of card, you will be able to use rewards in various ways.

The major part of the current credit card market constitutes rewards cards. However, there are various reward structures available with the card. If you own the rewards card, you should know the way to redeem it. For instance, you may redeem rewards for statement credits, checks, and merchandise. After every billing cycle, the rewards balance can be viewed on the credit card statement.

Some credit card agencies offer welcome bonuses as rewards to persuade potential customers to apply for the card. You can avail of these offers after fulfilling the spending requirement. The issue may also waive your annual fees for the initial year.

Business credit cards

While most credit cards are intended for personal use, business credit cards are for corporate purposes. Businesses of any size can use these credit cards to develop a credit profile. Several lending agencies offer business credit cards. The way to apply for business cards is almost the same as that of the basic credit card. However, the interest rate is considerably high when compared to traditional loans.

Having a business credit card is the best way to deal with business cost management. These credit cards are convenient and advantageous because small business owners can keep work-related spending separate. Credit cards also allow employees of your company to make deals. At the same time, businesses can monitor business-related purchases of employees.

A lot of unique benefits are available with business credit cards. Those benefits are different from rewards available with standard cards. Some business cards offer cashback on deals in stores. There is also an opportunity to get 0% interest for a temporary period.

Student credit cards-

Young users with a short credit history can choose these cards. Card issuers want applicants to fulfil only a few requirements. Many credit agencies do not charge any annual fee for student credit card users. Still, rewards and perks are available with these cards. Young people who want to build credit often apply for these cards.

Which factors are important while applying for credit cards?

When you apply for a new credit card, it is vital to choose the right one. You should check the terms, rewards, and features of the card.

Minimum credit scores-

The credit score requirement is the most crucial factor for applicants. It determines whether your application will get approved. But, not every credit card issuer has set the minimum requirements for credit score. Still, you should check the card issuer’s guidance and your own credit score before sending the application. Most top-rated lenders evaluate the FICO scores that range between 300 and 850. So, if your score is above 800, it is exceptional. You can try to improve the score if it is low during your credit card application.

Your purpose of using the card

You should consider the way you like to use the new credit card. So, look for credit cards that are suitable for your needs. For instance, a flat-rate rewards card is the right choice for those making daily purchases. To win more rewards, you may choose rewards cards providing complementary bonuses.

As a foreign traveller in another country, you can apply for a credit card, which does not impose any foreign transaction charge.

Again, credit cards with 0% APR are perfect for making large purchases. They help you spread out your big payments in due course without a high interest.

Besides, there are balance transfer credit cards for those who think of consolidating higher-interest debt. The fee charged by the cards is almost 3% of the amount you have transferred.

There are also travel rewards cards for frequent travellers. They can make your travel deals more cost-effective.

Annual percentage rates

APR stands for the percentage of the amount you have borrowed. If you have paid off the monthly balance of your card, there is no need to pay interest. On the contrary, if the balance is not paid, APR is applicable.

Several card-providing agencies want to attract new customers by offering 0% APR for the first year. The promotional period can be 1 to 2 years, and then the standard rate will be applied to the rest of the balance. So, while applying for any credit card, you have to go for one that comes with a low APR. You need to have a high credit score to be eligible for cards with a minimum interest rate.

Ongoing APR refers to the basic rate paid in interest while carrying a balance.

But, some credit card issuers impose a very high APR if you have delayed 2 months in making a payment.

Another type of APR you should know is the cash advance APR. When you make cash advances against your credit card, the issuer imposes a different APR.

In the Bank of Canda’s website you can find more infos about that.

Fees

As a credit card user, you need to pay some fees, although you do not pay interest. So, you should compare those fees while selecting the credit card.

• Annual charge: If you have not used the credit card and obtained its benefits, it is frustrating to pay the annual fee. Try to choose the card whose benefits and rewards exceed the annual fee.
• Balance transfer charge: Fees charged for balance transfer can range from 3 to 5 percent of the total balance amount transferred. For instance, you may need around $40 for every $1000 transferred. You will be able to save the amount by choosing the card charging a comparatively low fee for balance transfer.
• Foreign transaction charge: When you purchase something outside your country with your credit card, this charge is applicable. If the card does not charge the fee, you will be able to save 2% to 3% for every foreign transaction.
• Late fee: Only a few credit cards charge no fee for your late payment. But, for most credit cards, the late charge is up to $41. So, it is better to set up autopay or create a payment reminder.

Credit limits

The term ‘credit limit’ refers to the maximum amount that can be borrowed on a credit card. The initial limit varies with your credit score, credit history, and relationship with your card issuer. But, it is difficult to know about the accurate credit limit until the issuer has approved the card.

Depending on the card you have chosen, you will find a variation in the credit limit. If a particular card has various versions, you will find different minimums. While reading the terms and conditions, you can check the credit limits set by the issuer.

Remember that the initial credit limit will not be the permanent one. Several card issuing companies automatically evaluate your account before increasing your credit limit. But, you can also manage the credit limit on your own from the online account dashboard.

Conclusion

A particular credit card is not suitable for all people. Every card applicant has different needs, spending patterns, and credit scores. So, it is essential to compare various credit cards in the market before choosing one. It is also essential to check the rewards offered by these credit cards. From cashback cards to travel credit cards, there are several choices.