How to Pick the Right Credit Card

When it comes to finding the right credit card, one rule reigns supreme: know thyself.

To make fair comparisons between different credit card offers, you have to know what kind of consumer you are and how you plan to use the card.

“If people carry a balance or are going to transfer a balance, interest payments usually far outweigh any rewards they might get from a card, so they should focus on minimizing interest rates and fees rather than rewards,” says Julie Myhre, an editor at  comparison website NextAdvisor.com,. “Conversely, if they never carry a balance, they should absolutely try to maximize the value of the rewards they earn.”

Bethy Hardeman, consumer advocate for credit card comparison website Credit Karma, recommends knowing your credit score ahead of choosing a card. If you know what you will likely get approved for, it can prevent you from applying for a card and getting declined, which can hurt your credit score.

“Even if you’re approved, multiple inquiries will show up on your credit report and could impact lending decisions down the road for other, more important lines of credit, such as auto loans and mortgages,” Hardeman warns.

According to Greg McBride, senior financial analyst at Bankrate.com, if you plan to carry a balance on the card pretty regularly, look for the card with the lowest interest rate for the longest period of time. If you are making a big-ticket purchase and will only carry a balance for a few months, he says to focus on finding the lowest introductory rate you can get.

Hardeman recommends always paying close attention to fees when doing comparing offers and trying to avoid any that have them. “In general, you shouldn’t be paying fees – whether it’s interest, late fees or an annual fee,” she says. “There are some exceptions, but it’s important to heavily weigh these potential charges when determining which credit card to apply for.”

If you plan to pay bill in its entirety every month, reward should be at the top of your list when comparing cards. Myhre advises choosing how you would like to be rewards: cash, airline points or points toward retail purchases. Some credit cards will even put the cash back you earned into your retirement or college savings accounts.

Myhre warns that the credit cards that offer “incredible rewards” tend to also charge some sort of annual fee, which can be around $100 a year. When comparing reward cards, she says if you can’t figure out how much the rewards are worth, it’s a red flag that the rewards may not be that great. After all, if the rewards were exceptional, the card issuer would want consumers to easily see that.

Although shopping for a credit card can be time consuming, experts say the pay off of having the right card for your financial situation can be substantial. And now is the time to shop around: “Interest rates are really low, particularly for consumers with strong credit,” says McBride. “There’s a lot of competition for consumers that have a low probability of default.”