Simple Tips in Choosing the Best Credit Card


When it comes to searching for a suitable credit card, most of us apply for one either from the financial institution we bank with, from an advertisement we saw on television, or through a promotion with 0% financing for purchases and/or balance transfers for a certain period.

Given the vast number of credit cards that are available on the market today, it is nearly impossible to research each one of them to find out which ones are most suitable based on what you purchase the most and your spending patterns. Don’t worry, there is a 2019 analysis which I’ll share with you below for hundreds of credit cards in the U.S. News card database. But first, I’ll answer some questions I often get regarding credit card best practices.

 

Does having multiple credit cards affect your credit

Depending upon how much you spend, having multiple cards can improve your credit since it increases the amount of credit limit that is available to you. To maximize your credit score, you should always keep your debts under 30% of your total credit limit across all your credit cards.

Personally, I think having four major credit cards is enough for monthly usage as well as for emergencies. I suggest using two credit cards regularly to maximize rewards as both may give higher rewards for different categories.

 

How to Use a Credit Card

This may sound cliché, but it always amazes me as to how many people, including myself of course, tend to purchase things that are not necessary and cannot afford, on a credit card. I cannot emphasize enough how important it is to use a credit card like cash or a debit card. If you cannot pay of the entire balance by the due date, then it’s probably time to start using cash as a strategy for self-control.

In order to reap the benefits of rewards, you do not have to wait until the end of the billing cycle to pay the entire credit card balance. Some of you out there don’t like to wait until the entire balance accumulates on next months bill before paying it. What you can do for example, is after you make the purchase on the card, wait a few days for it to get out of the pending stage, and then pay the credit card balance by either transferring the money from your checking account, if you bank with the same bank, or just pay the balance through online banking. You will still earn your rewards.

Can the Interest Rate be Increased by the Credit Card Issuer

Interest rates for credit cards are usually variable. The interest rate is tied to a benchmark which is known as the index rate, or prime rate. This is then added to the spread assigned by the bank to get the variable rate. The rate will vary depending on whether the Federal Reserve raises or lowers the prime rate.

Other factors that may increase your credit cards rates are:

  • Your credit score has experienced a significant drop which means your credit card issuer can increase your rate on the condition they notify you 45 days in advance.
  • You are 60 Days Late on Payments – This will not only have a significant negative impact on your credit score, but also your rate may increase dramatically.
  • If you received your credit card with a promotional rate, then your rate will increase after the promotion.

 

Cash Advance Fee

One major area that I see consumers overlook when accepting an offer for 0% balance transfers is that either they don’t know or forget there is always a balance transfer fee of about 3% – 5% that is added on to the actual balance being transferred.

Depending on when you plan to pay off the balance, make sure transferring the balance will save you money and not add to it. Here is an example of where it would be worth it to transfer the balance:

The balance is $3,000 @ 17.99% and you make monthly payments of $200.  It would take about 17.12 months (1.43 years) to pay off the balance at which time you would have paid about $423.71 towards interest.  However, given the same scenario, you would not pay any interest at all, if the promotion is for zero percent for 15 months because at a monthly payment of $200, it will take 15 months to pay off the entire balance, saving you about $423.71 in interest. The 3.0% balance transfer fee on $3,000 would only come out to $90.00.  Savings of $333.71 ($423,71 – $90.00)

 

Choosing the Best Credit Card for You.

If you’re looking for one comprehensive database to compare credit card rates and fees for hundreds of credit cards in the U.S. News card database, check out the 2019 U.S. News Consumer Credit Card Fee Study. Happy Card Shopping!


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2 thoughts on “Simple Tips in Choosing the Best Credit Card

  1. I like that you mention how you can improve your credit by having multiple cards since you increase the available limit. When doing this, it might help to consider what expenses you have and your monthly budget. This could help you figure out what limit would be a good idea so you can then figure out which credit cards to get so it fits your spending.

    • I agree Erika. By figuring out the limit you need and not surpassing it will help control spending. Especially when it comes to something you really want, but don’t really need.

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