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5 questions for picking a credit card

Here are the things to ask yourself before you apply for a new piece of plastic to ensure that you get the right card for your needs.

By MSN Money Partner Jan 19, 2012 2:04PM

This post comes from Jeanine Skowronskiat partner siteMainStreet.


Credit card solicitations are a dime a dozen these days, as issuers seek to widen their user base. But consumers should refrain from selecting a new product based solely on a seemingly good deal that pops up in their mailbox.


Thanks to the damage an inquiry or, perhaps more importantly, any misuse can do to your credit score, it's a good idea to conduct a little research before applying for a new piece of plastic. Here are the five big questions you should ask yourself to find the card that's right for you.


How good is your credit score?

Your credit score will determine whether you are approved for the card, as well as what your interest rates and credit limit will be. Consumers can spare themselves an extra inquiry by sticking to products for which they know their score will qualify them.


For instance, those with bad credit -- or no credit -- will probably need to apply for a secured card, which minimizes the risk of default by requiring that applicants make a down payment upfront that will match the card's line of credit, before graduating to a traditional line of credit.


Those with great credit, on the other hand, will want to go after a card that offers either the lowest annual percentage rate or features a competitive rewards program, depending on how they're planning to use the card.


Do you plan on carrying a balance?

If you don't think you can pay your balance in full each month, the APRs associated with the cards you're considering should be the driving factor behind which one winds up in your wallet.


This is because any dollars, frequent-flier miles or other rewards earned while using the card will be rendered moot if you're paying interest on your purchases. (Rewards cards tend to have higher interest rates, so issuers can pay for all the points they are paying out.) Currently, the average APRs rest at a fairly high 14.71%, but some low-interest credit cards, such as the Visa First Simmons Platinum, offer rates as low as 7.25%. Post continues below.

Are you already carrying debt?

Those carrying a high balance on an existing credit card should probably refrain from adding to their credit card arsenal . . . unless, of course, they're taking up an issuer on a great balance transfer offer.


Balance transfer cards allow consumers to move high-interest debt they carry on existing credit cards to a new one that charges little or no interest, at least for an introductory period. Competitive introductory periods, which can also be on purchases, typically last anywhere from 15 months to two years, but consumers will want to make sure the card will carry a low APR once the period elapses. They should also make sure the card doesn't carry a high balance-transfer fee, which can range from 3% to 5% of the debt you are moving over.


Will you use the rewards?

In addition to higher interest rates, many rewards cards also carry annual fees (another way issuers can recoup the costs associated with benefits), so those looking for a card with benefits shouldn't necessarily sign up for a swanky one just because their credit score qualifies them for it.


The American Express Platinum Rewards Card, for instance, is great for affluent, globe-trotting customers who will use the exclusive hotel and resort upgrades, VIP access, travel insurance and $200 airline fee credit it affords them. But it's definitely not the card for a consumer whose infrequent flying doesn't justify its $450 annual fee. That particular consumer may be better off signing up for Amex's Blue Cash Everyday Card, which has no annual fee but still nets cardholders 3% back at supermarkets, 2% back at gas stations and department stores and 1% back on other purchases.


Which spending category do you put most of your dollars toward?

Of course, getting the biggest return on your buck means looking at more than just a card's annual fee. While rewards cards in the past focused largely on travel perks, offerings have become so varied over the past few years as issuers strive to remain competitive that savvy consumers will want to take a look at their personal spending habits.


And remember that credit card searches also warrant a careful reading of the fine print.


More on MainStreet and MSN Money:

Jan 20, 2012 1:32PM
This article leaves out those who carry no balances and who profit over paying with cash by using cash back credit cards.  Some give up to 5% in some categories - but only on the first $300 of purchases within an up to 3 month period.  Some give up to 20% on florists, etc. by linking through the card's website first.  Some company-base cards offer a higher cash back percentage at the company but also cash back at other places.  If you're going to use one card most of the time, one should pick the card that's going to give the most cash back where you spend the most money.  Personally, I use a lot so I use their Visa (through Chase bank) which gives me 3% cash back at Amazon; 2% for gasoline, drugstores, restaurants and stationary stores; and 1% for everything else with no spending limit.  And I don't have to jump through hoops to get my cash back: when I check out at Amazon, I'm always asked how much of my current cash back total I want to use on the current purchase.
Jan 20, 2012 11:00PM
The best card you can get is the one that says "Debit" on it. Right next to the part with the "Credit Unions" name on it.

Man that was easy. And much shorter than the article.

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