How to Choose a Credit Card: 7 Easy Steps
Regardless of your credit score, choosing a credit card can feel overwhelming. With hundreds of cash back cards, rewards options, and varying terms from different card issuers, it’s hard to know which is the right fit. The truth is that the best card depends on your spending habits, your credit history, and your financial goals.
However, if you understand the key steps and take a few minutes to do some investigation, you can narrow the field quickly and select a card that works for you now and in the future. Here are the seven steps to securing the right credit card just for you.
1: Know Your Credit Score
Your credit score is the gatekeeper when it comes to getting virtually any credit card. Lenders use it to measure how likely you are to pay your bills on time. In fact, credit cards are often grouped into categories based on the credit score required for approval. Our best credit cards for good credit review is an excellent example of that, as is our overview of the best unsecured credit cards for those with less-than-stellar credit or who are trying to build credit for the first time.
While some credit cards exist that will extend credit to consumers with almost any score, having a higher credit score opens the door to better rewards, lower fees, and more generous perks.
Everyone has a variety of credit scores attached to their credit history, and depending on the lender you’re trying to borrow from. However, most lenders and credit bureaus use either the FICO score or one of several VantageScores. For instance, a recent change has led to a greater adoption of the VanageScore 4 model by home mortgage companies.
Typical FICO credit scores fall into these categories:
- 300–579: Poor
- 580–669: Fair
- 670–739: Good
- 740–799: Very Good
- 800–850: Excellent
If you’re still building your credit, a secured credit card can be a good idea until you qualify for stronger rewards-card options. Students may also benefit from starter products like a student credit card designed to establish a positive history.
In any case, once you know your credit score, you can begin confidently searching for your credit card options within the approval range it allows. However, it’s essential to understand that your credit score is just one of several factors creditors look at when considering your application.
Other factors include the following items and sometimes more:
- Debt-to-income (DTI) ratio
- Credit utilization rate (CUR)
- Total income
- Number of recent hard inquiries on your report
- Negative or derogatory comments in your report
- Types of existing credit
Related Article: Are Balance Transfer Cards for Fair Credit Worth It?
2: Define Your Spending Habits
Credit cards often come with rewards programs and benefits that kick in when you use them as intended by the issuer. The right credit card should match your typical buying habits. This is a better strategy than trying to match your spending to the requirements of a card. Before applying, think about where your money goes:
- If your normal daily spending looks like a list of groceries and gas, a simple cash back card for everyday spending could work well. Also consider cards that specialize in rewarding gas and grocery purchases.
- Dining and travel rewards cards commonly fall into categories designed for those with good to excellent credit scores. However, numerous others exist as well.
- If you have other credit cards and are carrying a balance, a balance transfer card may help you save on interest rates by consolidating your debt, particularly if you can take advantage of 0% intro APRs.
Matching your spending to rewards ensures you actually benefit from the perks, instead of leaving potential rewards on the table.
Related Article: How to Budget With Credit Cards Without Going Into Debt
3: Compare Costs and Fees
Not all rewards are free. Some credit cards offset their benefits with annual fees, higher interest rates, or hidden costs. Before applying for a new card, review any associated costs of owning it.
- Annual fee: Is the rewards structure worth the cost?
- Foreign transaction fees: Frequent travelers should avoid these.
- Balance transfer fees: Crucial if consolidating debt.
- Variable APR: Your credit history and score affect where you land in the range.
- Introductory APR: Some cards offer rewards with a temporary 0% period, but these are temporary. Know what interest you’ll be charged after the intro period.
Consider all of the costs associated with your candidate cards and determine if its cost can be realistically offset by any rewards or perks.
Related Article: Upgrade Credit Card Reviews: Which One Is Right for You?
4: Match Rewards to Your Lifestyle
Rewards come in different flavors: cashback, points, or miles. Deciding which is right for you depends on how you want to redeem them.
- Cash back cards are simple and often flexible in terms of how you receive the cash. The Upgrade Life Rewards Visa, for instance, offers cash-back redemption through statement credits, purchases made through the company’s portal, or through direct deposit if you have a checking account at Upgrade.
- Points-driven rewards can be redeemed for travel, gift cards, or statement credits, depending on the issuer of your card. Our Chase Sapphire Preferred review highlights this kind of flexibility.
- Miles rewards generally refer to travel-based rewards cards and airline-specific partnership cards. They’re perfect for frequent flyers and international travelers.
Also, note the rewards structure when choosing your card. Some cards offer flat-rate cashback on all purchases, while others use rotating categories or fixed multipliers for groceries, gas, or dining. Still others require you to register periodically for high-value rewards categories.
Related article: How to Use a Rewards Credit Card for Maximum Gain
5: Consider Intro Offers and Long-Term Value
Many rewards credit cards grab your attention with enticing introductory APR offers or large welcome bonuses. For example, a card may reward you with cash-back, a statement credit, perks, or miles, after you spend $500, $1,500, or often more, on purchases in the first three months.
While these offers are appealing, the real question is what the card delivers after taking advantage of the special offer. Look at ongoing reward rates, redemption flexibility, annual fees, and your average APR to determine true long-term value.
6: Factor in Extra Benefits
While the best extra-benefits perks are typically associated with premium cards, credit cards in virtually any category or approval range can come with surprisingly useful extras, including, but not limited to, the following.
- Travel insurance and trip cancellation coverage
- Purchase protection and extended warranties
- No foreign transaction fee for traveling
- Concierge services or entertainment access
Even if extra perks weren’t on your radar in your initial card search, it’s worth taking a look at any benefits you could take advantage of. It may be the one thing that helps seal your decision.
7: Apply Strategically
Every credit card application triggers a hard inquiry with the major credit bureaus, which will temporarily lower your score. That’s why it’s best to apply strategically by following a few guidelines.
- Use prequalification tools where available to gauge your approval odds without impacting your credit.
- Avoid applying for multiple cards in a short period.
- Maintain on-time payments to all of your creditors to strengthen your profile over time and open up even more positive options.
Final Thoughts
Learning how to choose a credit card isn’t just about finding the flashiest perks. Instead, it’s about evaluating contenders for your business and aligning your choice with your spending habits, credit history, and goals. The right card can help you earn valuable rewards, save money, and even boost your credit score if you use it responsibly.
When you’re ready to compare the top contenders, check out our overview of the best credit cards for good credit and explore in-depth reviews of our top choices in the category.
- Upgrade Life Rewards Card: Best for everyday household spending
- Capital One Quicksilver: Best for simplicity and strong approval odds
- Citi Custom Cash Card: Best for high rewards in various spending categories
- Chase Sapphire Preferred: Best for flexible travel rewards
- Synchrony Plus World Mastercard: Best for flat 1% cash back simplicity
