How to Choose a Credit Card for You

Choose a credit card to improve your credit score, save money, or earn rewards; but don’t get in over your head.

Hand choosing a credit card from several offered.
Choose a credit card that furthers your goals.
(Image credit: Getty Images)

Credit card debt is surging in the U.S. as consumers struggle to keep up with inflation and rising interest rates. Owning a credit card can pose a financial risk, but if you choose a credit card wisely you may get benefits unattainable to you without a card.  

No card is right for everyone, and there probably isn’t even one best card for you. The key is to start with an understanding of where you are now; what is your credit profile and what is your top goal for owning a card? Do you need to improve your credit? Are you planning a large purchase or hoping to transfer a balance from another credit card with high-interest rates? Or do you have your eye on cashback or travel points via a rewards credit card (opens in new tab)? A little soul searching before your credit card research can pay off in the long run.

Here are the questions you should ask yourself before applying for a credit card.

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What is My Credit Score?

If your FICO score is above 670, you are considered to be a “good” or better credit risk. Good credit may qualify you for cards with lower interest rates, rewards, or other benefits. If your FICO score is below 670, you have “fair” or even “bad” credit and will need to apply to cards that can improve your credit score. 

A FICO score, often called a credit score (opens in new tab), measures your creditworthiness on a scale from 300 to 850, where a higher score is better. Major banks, credit unions, and credit card companies often provide a free FICO score to their customers. If you can’t find a FICO score there, you may access one for free at the credit bureau Experian (opens in new tab). Checking your FICO score will not lower your credit score.

 

Why Do I Want a Credit Card?

If you have good credit or better, you may qualify for a variety of rewards credit cards that can help you lessen the impact of inflation on your purchasing power. These rewards cards may have some (or many) of the following features. 

  • A fixed amount of cash-back on all purchases (several issuers offer around 2%).
  • Cash-back for purchases in specific categories, such as 5% back on groceries.
  • Points or miles for travel, such as for flights, hotel stays, and car rentals.
  • A sign-up bonus if you spend a certain amount in the first few months.
  • Some rewards cards have an annual fee.
  • In some cases, green credit cards (opens in new tab) reward more sustainable purchases.

Some of the best rewards credit cards can help pay for your next vacation, holiday shopping, or necessities. Just make sure you can pay off your credit card bill in full every month, or your interest payments may wipe out any benefits you get from a rewards program.

I Want a Balance-Transfer Credit Card to Consolidate My Debt

If you cannot pay your credit card bill in full each month, you are said to be “carrying a balance.” When carrying a balance on a card with a high-interest rate, you need to plan your next move carefully. When your card’s interest rate is double digits, paying the minimum payment each month is not a long-term solution, and can even push you into a downward debt spiral. By getting a balance-transfer credit card with a 0% introductory APR (annual percentage rate), you buy yourself time to pay off the debt.

When selecting this type of credit card, you should keep in mind the balance transfer fee (usually between 3% to 5% of the total transfer amount) and how long you have to pay off the debt before the interest rate increases.

I am a Student

If you are a student with little or no credit history, a credit card can help you gradually grow your credit score. In the past, students were typically shut out of rewards programs, but now you can select from a variety of rewards credit cards for students (opens in new tab). But be honest with yourself. If you think you may have trouble paying your monthly credit card bill in full and on time, you might do better to stick with a debit card. 

I Need to Repair or Increase My Credit Score

The past few years have been financially difficult for many Americans; if you have harmed your credit score by missing payments or failing to pay bills on time, you are not alone. There are options for repairing your credit, but know that there are no quick fixes.

One of the best ways to repair a bad credit score is with a “secured” credit card. A credit card is “secured” when the borrower pays an upfront deposit that the lender typically holds for the entire time the account is open. Deposit amounts may vary but generally are between $200 and $300. Some cards, called “low-deposit credit cards,” start with smaller deposits, such as $49, and help borrowers gradually increase their deposit amount. Read our detailed guide on how to get a credit card with bad credit (opens in new tab) for more information. 

The “line of credit,” or the total amount a lender can borrow, may be the same as the deposit amount or a bit higher.

Applying for the Credit Card You Choose

By now you should know your FICO score and your credit card goals, as well as the best card options for you. Keep in mind that when you apply for a credit card, the issuer will conduct a “hard pull,” meaning it will ask one of the three credit bureaus for your credit report, and your credit score will decline for a period of time. To avoid a hard pull, you can ask the bank issuing the card (or look on the bank’s website) for a prequalification, or a quick check of your credit in a way that will not damage your credit score. 

Ellen Kennedy
Contributing Editor, ESG, Kiplinger.com

Ellen writes on environmental, social and governance (ESG) investing and sustainability. She was an ESG manager and analyst at Calvert Investments for 15 years, focusing on climate change and consumer staples. She served on the sustainability councils of several Fortune 500 companies, led corporate engagements, and filed shareholder proposals. 

Prior to joining Calvert, Ellen was a program officer for Winrock International, managing loans to alternative energy projects in Latin America. She earned a master’s from University of California in international relations and Latin America. She is fluent in Spanish and Portuguese.