Credit cards are intended to assist you in managing your finances.

Like any other thing in this world, credit cards can be used both for good and bad. 

In case of improper use, it can easily be abused, destroying your credit history. On the other hand, when used adequately, it can prove to be a handy financial instrument. 

It is without a doubt that our present world can’t survive without credit cards. With the proper knowledge and knowing how to choose the best credit cards, you can become eligible for some good deals and rewards.

Credit card definition

A credit card is a physical card that lets you borrow money from a bank or similar financial institution.

When you use your credit card, the bank agrees to pay the merchant for the goods or services you buy and then charges your account for the amount spent.

If you disburse your balance in full each month, no interest will be charged. 

However, if you do not pay off your balance in full each month and there is an outstanding balance at the end of each billing cycle, interest will be charged on any unpaid balance.

How to choose the best credit card?

You’ll have to choose if you want to keep the number of credit cards in your wallet manageable but still get the benefits. Here are some general financial goals that credit cards help people reach.

1. You should know what you want your credit card to do.

Build or improve your credit

One of the most important rules of the American financial system is that a good credit score can open many doors, but a bad credit score can close them. 

If you want to purchase a house or car, having good credit will help you get the best loan terms, which could make your loan less expensive in the long run. 

Spend less money on things you use every day

If you want to make your money go further, you should get a credit card that gives you cash back, points, or miles. You get a small amount back when you use these cards to buy something.

Pay for your next trip

A credit card with travel rewards can help you save money on your next trip and let you earn points or miles on every purchase you make. Often, the rewards you earn on travel purchases are higher than on other purchases.

2. Understand your spending habits

Next, you should consider how you spent your money in the past. If you have a big family, do you spend much money on groceries every month? Do you often order food to go or eat out?

If you use your credit card in the right way, you may be able to earn more rewards in different spending categories. Let’s use dining as an example:

 You spend an average of $1,000 a month on food. With a 2% cash back card such as the CitiBank Double Cash Card (1% when you buy and 1% when you pay), you could earn up to $20 per month or $240 per year.

3. Research the different card types out there

Once you know your credit score and the things you spend a lot of money on, you can start looking at credit card offers. At this point, you should decide which features of your credit card you like best and how you want to use your points.

Reward cards

When it comes to cashing in rewards, bank cards give you the most options. Most of the time, these cards offer big bonuses on everyday purchases.

To use points, you can get cash back or transfer them to airline and hotel transfers. This makes these rewards very flexible.

The Chase Sapphire Preferred Card & the Citi Premier Card are some of our favorite bank reward cards.

Cash back cards

People who like to keep things simple regarding credit card rewards might like cash-back credit cards. You don’t have to keep track of any rewards programs, and you never have to worry about the card issuer lowering the value of your rewards.

Cash-back cards like the Blue Cash Preferred Card from American Express are great if you want to get the most out of your everyday spending at US gas stations, supermarkets, and certain streaming services.

Co-branded credit cards 

People loyal to a particular program but not enough to get elite status should get airline and hotel credit cards with the same name. Some perks come with these cards that can make your travels easier.

4. Learn basic credit card terms

When you’re looking for a credit card that meets your needs, it’s helpful to know some basic terms you’ll come across. If you know these terms, you’ll be better able to compare offers from different card issuers and pick the one you like best.

• APR: It stands for annual(yearly) percentage rate.
• Fees: Credit card fees are extra costs that can come with some credit cards.
• Minimum payments: A minimum payment is the smallest amount you can pay to the company that issued your credit card each month.
• Welcome bonus: Some credit card companies offer welcome bonuses or sign-up bonuses to get new customers.

How to apply for a credit card?

You can start applying for a credit card by:

• Phone
• Mail
• online through a bank/financial institution

The credit card provider will examine your credit with a credit reference agency when you fill out a form.

Your credit record indicates how you manage your bank account and loans. It tells the provider if you’re a good payer and about court rulings over the last six years.

Then, check your credit card application for errors before submitting it.

Ask your credit card provider for help completing the form. You must sign the form to say the information is correct; giving false information constitutes fraud.

Upon approval, you’ll sign a credit agreement. This paper outlines your and the provider’s contract. The credit agreement explains how much you can borrow, when to repay, the interest rate and fees, and your rights and duties.

Bottom Line

Knowing how to choose a credit card depends on your needs. Consider a card that offers the most significant rewards in your main spending categories and helps you travel.

Before applying for a credit card, know your credit score and any issuer limits that could affect your approval or welcome bonus. If you qualify and use your new credit card wisely, it can help you build credit and earn rewards.