I have more credit cards than the average person. Sometimes when I whip out on that’s cool looking, like my American Express Blue Cash Everyday card, I’ll get the question: What’s the best credit card? My answer probably doesn’t satisfy most people, but the real question is: What’s the best credit card for me? There is no single, best credit card that fits the needs of everyone. You can compare a credit card to a car in the fact that they all look and function quite differently. And based on our own individual needs, certain cars will be more optimal than others. It’s the same for credit cards.
So how do you go about choosing a good credit card? You’ll need to inspect your current financial health and consider you current and future needs. Only by going through this process can you actually select the best credit car for you. Stop basing your credit card decision on the free towel they’re giving away at the pro sports game.
Your Credit Card History and Financial Health
If you’ve had a credit card in the past, or you have other credits cards, then you need to consider whether you carry a balance or not. If you always pay your credit card balance off completely each month, then you don’t need to worry about this part. However, if you regularly carry a balance on your card, then the interest rate is the simple most important characteristics of your future credit card.
When you first get a credit card there will be an introductory interest rate. Most cards will have an introductory rate of zero percent, or close to it. You’ll then want to determine how long this introductory interest rate will last. Clearly a longer period is better. Look for something around a year. You will also want to consider the long-term rate of the card. If you don’t plan on having too many credit cards, but plan on carrying a balance, this is going to be very important. Don’t be suckered into getting a card based on its low introductory rate. You will usually see this displayed as some rate + prime. As of this writing, the prime rate is 3.25%, so you can calculated the interest rate from there. If you’ve been late on your credit card payment in the past, you’ll also want to consider the adjusted rate that will be used if you’re late with a payment.
Your Spending Habits
If you consistently pay off your credit card, then you’re really able to take advantage of the benefits of a credit card. This is the true difference between someone who uses their credit card as a short-term loan, and someone who takes advantage of their credit card. If you’ve been using some type of budget tracking software such as Mint.com, then review your spending habits over the past three to six months. Review your spending categories by the ones commonly used by credit card companies, such as gas, groceries, office supplies, books, restaurants, and entertainment.
You will then look for credit cards that reward you the most in the areas where you typically spend the most. For me, I typically spend quite a bit on gas and Amazon. So I have a credit card that gets me 3% back on gas, and another that gives me 5% back on Amazon (because all Amazon purchases fall into the “books” category). When spending money, I determine the card to use based on the rewards that I will accumulate. Because I always pay off my credit card, it’s the only criteria I really use to determine which card to use for a specific transaction. I don’t have to worry about how much money is on which card, or when that payment will come due.
The best way to find the credit card that fits you, once you know your history with credit cards and your spending habits, is to go directly to the major bank websites. American Express, Citibank, Chase, Bank of America, and CapitalOne are the most common. You can also check out the card providers directly: Visa, American Express, MasterCard, and Discover. In my opinion it’s best to go directly to the card companies rather than Googling because Googling will just show you the ones that people are marketing (spamming) the most. These won’t necessarily be the best cards for you.
If you usually make bad financial choices, then you probably shouldn’t apply for any credit cards. But if you’ve got your spending under control and you’re diligent, credit cards can provide a lot of benefit, and I think it’s silly when a major personal finance guru such as Dave Ramsey gives blanketed advice to people to destroy their credit cards and only pay with cash.