THE BIG STORY

Four things you never thought about when looking for credit cards (but wish you had)

Every card isn’t right for everybody!

Credit cards. Gotta have one, they’re necessary to function in today’s world. Many smaller retailers don’t even take cash any more. A card is how you build credit — and credit means good interest rates on a house or a car. That will save you thousands or tens of thousands of dollars 💵. Credit cards make most online transactions straightforward. They protect you against scams. Some of them offer great deals, too.

So how do you know which one to get?

Before we dive into that, here are some things to avoid. 

Don’t respond to the first company that sends you a “prequalified” email or mailer. 

Chuck those mailers in the recycling bin. Shop around, see what else is out there! If you’re on the radar of companies for credit cards, that means you have options. Don’t close those options down without checking them out. 

Your existing bank might not have the best credit card for you.

Second, your bank likely offers a credit card — while it could be the best fit for you, it might not be, don’t automatically assume the benefits outweigh the costs. 

Don’t assume that the options you see are your only options.

All credit cards give you something. It’s a wide world. If you’re not finding what you’re looking for, try asking financial professionals, or digging deeper. You’d be surprised at how many credit cards are out there, even for very specific shoppers.

In other words 

If we had to sum that advice up, it would be “don’t impulsively choose the first credit card you find or that finds you.” Convenience is a consideration but it should never drive financial choices.

Now that we know what not to do, here are some solid questions to answer when you’re shopping around for a credit card.

#1: What are you using it for?

Most credit cards offer flexible points. You can use them for cash back, or trips, or hotel stays — lots of things. But they’ll give special bonuses (double, triple, quadruple points) for specific types of purchases. If you know you’ll be using the card for food shopping, or for travel, or for online subscriptions, you might be able to find offers that stretch your benefits as far as possible. Airline companies offer cards with complimentary tickets. Hotel chains offer bonus points on stays. Amtrak offers a card with points for train travel. If you know what the card will be used for, you can find a card that will let you carry your benefits a lot further.

The one thing you should never do is lie to yourself. If you take out the Home Depot credit card through Citibank because you want to do a project on your house, but you love travel and spend your discretionary income on remote camping trips 🏕️, look, you just squandered a bunch of benefits you could’ve had through the American Express / Delta Skymiles card such as tickets, seat upgrades 💺, and discounts (and overpaid on your travels). Be honest about your priorities before you get a card. If your priorities change, that’s fine — ditch that AmEx Skymiles card, and grab a Home Depot card instead!

#2: What can you afford to pay in a month?

Credit cards with a lower maximum might be good for people who tend to overspend. You don’t want to carry a monthly balance. That might be unavoidable for some people, and if so, you’ll want a card with a low interest rate. Interest can stack up quickly and overwhelm you if you’re not careful. It’s how people get in debt📉which is a place you don’t want to be. If you pay your balance off monthly, it won’t be a problem. Some people say to use your credit cards for everything. I say, use them for what you can afford.

#3: Do you bank with just one financial institution?

Check out the benefits it offers on its credit card. If those perks line up with what you actually do in your life, credit cards with your bank also come with conveniences — automatic payments and free transfers. Most banks will also offer free analysis📊 at the end of the year. They’ll look at your spending and savings habits, and see trends you wouldn’t see yourself. That’s useful information. If booze and smokes eat up a quarter of your annual budget, you might think about changing some habits.

#4: Do you like the credit card company?

For some people, credit cards are all about the perks. For others, a “perk” is knowing that the card company’s political and cultural values align with your own. Using a credit card that does business with people or countries you think are evil might give you plenty of airline miles, while making you feel like an opportunist or a cynic. Some people are happy foregoing credit cards entirely for this reason. For others, it’s just another consideration.

Those are the four questions you need to ask yourself when looking at credit cards. Find a card that works for you, and with your lifestyle. It’s simple, right? You’d be shocked at how many people never bother to ask one, let alone all four questions.

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