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How to Find the Best Credit Card for You?

Main Steps:


Know your Credit Standing:

You should start by knowing how good is your credit. In other words, is your credit considered Excellent, Average, etc.? Click here to find out how you can determine that.


Decide what you need the Credit Card for:

Once you know your credit, it is important to realize that a credit card is very good for either:

  • Carrying a balance only (i.e. making no purchases) OR
  • Transacting only (i.e. paying your balance in full every month)

Credit card companies would like you to both carry a balance AND use your card on a daily basis because this is how they usually make the most money out of consumers.

Therefore, before looking for a credit card you need to decide of whether you are looking for a credit card to put on some of your debt and therefore not use on a daily basis or for a credit card that you do not want to carry any debt and pay finance charges, but instead pay in full every month.

Carry a Balance:

If you have decided to use the card for carrying a balance then you have to make another decision. Are you planning to use the credit card to:

  • Transfer existing debt only
  • Incur new debt only
  • Both of the above

    • If you are planning to use the credit card for transferring existing debt only then you should obviously look for the card that has the lowest Balance Transfer APR for the longest period.

      However, there are a few key things to be aware of:
      • Balance Transfer Fees: Most credit card companies claim very low rates, but they accompany these low rates with fees. Make sure that you factor the fee into your decision of which offer will charge you the least amount of fees & interest rates over the next 12 months
      • Purchase APR: Make sure you do not use the card to make any purchases! Cards with low APR's on Balance Transfers usually have average/high APR's on Purchases. The reason they do that is because when you send a payment they first payoff the balance that has the lowest APR. As a result, they lock-in monthly finance charges from all purchases that you make until your balance transfer is paid-off.
    • If you are planning to use it for incurring new debt only then you should obviously look for the card that has the lowest Purchase APR for the longest period.
    • If you are planning to use it for both transferring existing debt and incurring new debt then you need a card with the lowest Purchase APR AND Balance Transfer APR for the longest period. Do not forget the Balance Transfer Fees that are mentioned above and also depending on whether your existing debt or future debt is higher you should give more emphasis to the respective APR.

    Transact Only (i.e. pay your bill in full every month):

    If you have decided to use the card to transact only then getting a card with rewards is the most important thing. There are a lot of different types of rewards. Some cards will give you airline miles, others hotel points, others cash back, etc.

    Our opinion is that it is very hard to keep-up with all the fine print. For example, how many miles get you a free ticket and under which conditions, etc. It is especially tough given that banks tend to change these terms on a frequent basis. Therefore, keep things simple and just get a card that gives you cash back only.

    Here are the best 2 cash back rewards credit cards:

    • If you spend more than ~$20,000 a year on your credit card you should go for the Blue Cash from American Express
      • Once you spend over $6500 on your Card, you can earn 5% cash back on all your everyday purchases at supermarkets, gas stations and drugstores and 1.5% cash back on all other purchases.
    • If you spend less than ~$20,000 a year on your credit card then you should go for the
      Capital One® No Hassle CashSM Rewards Card
      • This card gives you 1.25% cash back at the end of the year on all your purchases.


    Where to get your new Credit Card from?

    The websites that we recommend, in order of preference are:

    Click here to learn about why we recommend these websites.


    The Most Important thing to do once you get the Credit Card:

    Credit card companies hope that you do not always pay on time. The reason for that is because a number of things to their benefit happen when you miss a payment. More specifically,

    • They earn late fees
    • The assess finance charges to customers that normally pay their bills in full every month
    • They get the opportunity to change APR, especially if you have a 0% promotional APR

    In order, to avoid all of the above we recommend that you call your credit card company and ask them to automatically withdraw your payment from your checking account. In that way, you will never miss a payment and not only none of the above will happen, but your credit score will also benefit by never missing a payment. This service will not cost you anything!

    If you are hesitant about this, ask the credit card company to withdraw only the minimum payment from your account and by doing so on the months that you want to pay more you can send an extra separate payment.

     

    Best of luck,
    Your Financial Ally