Having a credit card can not only be convenient but help you build credit and get out of a financial pinch. Before choosing a credit card, you should do your research regarding the basic financial terms.

Whether you have good credit or bad credit, you should always shop around to get the best deal. Avoid paying higher interest or fees by choosing a credit card that meets your needs and budget.

You should aim to pay off your balances in full every month to avoid any interest or fees. Unfortunately, 60% of Americans carry a credit card balance, equalling over 1 trillion collectively.

If you think you will fall into the sixty percent, think twice before applying for another credit card. Credit card debt can snowball, and if you are not careful, cripple your spending for the long haul. If you must get a new credit card, choose the one with the lowest APR possible.

If you can pay off your balance every month, seek cards with generous rewards. If the card has an annual fee, weigh the fee amount compared to the rewards you will receive in return. Only choose a flight card if you plan to use airline miles, hotel card if you plan to travel, etc. If hobby credit cards aren’t for you, look into a card that provides cashback.

You should start your new credit card search at your bank or credit union. Since you already have accounts in good standing with them, they may be able to offer you a better APR for being a valued customer or opting for multiple products.

If you like your current credit card but wish it had better terms, it is worth the time to call them and ask if they can match terms with another card you qualify for. Keep in mind you are more likely to be able to negotiate with your current credit card company if your account is in good standing at the time of the call or online chat.

Tip: Applying for too many credit cards (or credit-based accounts) in a short period can negatively affect your credit score.

Common Credit Card Terms

Common Credit Card Terms

APR. In terms of credit cards, APR is the yearly interest rate.

Annual Fee. This is a yearly fee and can vary based on the type of credit card. You should always look for a 0% annual fee credit card unless you are applying for a rewards card that makes it worth paying for an annual fee. (i.e., A flight rewards credit card that exchanges the annual fee for flight points to help you get a free airline ticket faster).

Minimum Payments. Every credit account has a monthly minimum payment that is required to keep the account active and in good standing. Minimum payments should be exceeded when possible, to pay off your balance on time. To avoid interest and fees, pay off your balance in full each month.

Balance. This is the total amount you owe, including your purchases, interest, and fees.

Balance Transfer Fee. When you transfer a balance from one credit card or credit issuer to another, it can be in the form of a flat fee or a percentage of the total amount you are transferring. Look for promotional deals where you can transfer a balance for free or receive zero percent interest for a long period (twelve to eighteen months). Make sure you read the fine print when you transfer a balance. Only do a balance transfer when the APR is lower on the new card, or you need more time to pay off existing debt.

Credit Limit. When applying for a credit card, you will be given a credit limit based on a proprietary calculation determined by your bank, retailer, etc. This is the maximum amount of money you can borrow. While it is easy to max out your limit, it is not wise to do so. Maxing out a small credit line can affect your credit score and make borrowing more difficult in the future. Once you have established credit and your financial circumstances improve, you can ask for a credit limit increase. This can help your credit score and provide more borrowing opportunities.

Go-To Rate. The “Go-to” rate is referring to the standard interest rate that is charged after your introductory period ends.

Grace Period. A credit issuer will normally have a grace period policy. This is several days set by the credit lending company that you have to pay your charges in full before an interest charge is added.

Intro APR. Promotional APRs are always less than the “go-to” rate. Federal law states that promotional APR periods must last a minimum of six months. Intro APRs are great for when you need to spread out payments for an unexpected purchase. Read the fine print to find out what the “go-to” rate is. Make sure you can pay off the balance before this standard rate goes into effect since a credit rate can start as low as 0% and switch to upwards of 20%, always have a payoff plan in mind before signing up.

Penalty APR. If you pay late, try to charge more than your credit limit, or have a returned check, your credit issuer will consider your account in default. Once your account is in default, the credit issuer will enact the penalty APR, which is higher than both promotional and standard rates. If you continue not paying on your balance after sixty days, the penalty APR can also be applied to your existing balance.

Penalty Fees. Additional fees may be added for late payments or exceeding your credit limit. These fees should be explained in your general credit terms. Any violation of terms or lack of required payments may result in penalty fees.

How to Choose the Best Credit Card

Intro APR

This rate is often a low rate, specifically to incentivize you to apply for the credit card. After the intro APR has ended, your rate will increase to the standard rate. Keep this in mind, especially if your intro APR is 0%.

Once your intro APR has ended, any balance left on the card will receive a daily interest amount (determined by the credit card you choose). This could greatly increase your balance in a short period. According to the Credit Card Act of 2009, a credit card company is required to give you at least a six-month intro APR.

Balance Transfer Fee

If you carry a balance on your credit card, you may benefit from transferring this balance to a credit card with a lower APR. To do so, you will need to complete a balance transfer.

Balance transfers can have varied terms, but most charge a 3%-5% fee for the service. You may also have to pay a flat fee or no fee at all, depending on the credit issuer and your credit score.

Balance transfers are charged by the credit card company that you are transferring the old debt to. Always review terms before completing a balance transfer and keep making payments to your old card during the process. Balance transfers can take a few days to a few weeks depending on the credit issuer.

Regular APR

The standard annual percentage rate (APR) is a fee for borrowing money. This rate can vary based on the credit issuer and your credit score. The average APR for a US credit card is just under 18%.

If you carry a balance on your credit cards from month to month, the regular APR should be a top consideration when choosing a credit card, since the higher the APR, the more you will pay and the longer it will take you to pay off the balance.

Credit Score

Based on your credit history, a credit score can range from 300 to 850. The higher the score, the more trust a financial institution has to lend you money. It will also be easier to get quality loans and interest rates.

You can raise your credit score by having a car loan, mortgage, credit card, etc. and paying your monthly balance on time. You can also increase your score by keeping your debt to income ratio low and keeping unused credit card accounts open.

Sign-up Bonus

Credit cards want you to charge a lot of purchases when you first open, hoping that you will not be able to pay off the balance monthly. Because of this, many of them offer a bonus for spending a large amount within 1-3 months of opening the credit card. If you are diligent with your payments, this could be a worthwhile reward for a generous statement credit or extra spending cash.

Check out our reviews on the best credit cards available on the market:

How You Spend

If you pay off your credit card balance every month, you should be able to qualify for a reward card that matches your lifestyle. You can choose a card that offers points for travel, gift cards, or material goods. You can also pick a card that offers cashback.

Reward credit cards work one of two ways. You can get a percentage back for buying one specific category or tiered rewards for multiple categories. Categories may be the same all year round or rotate. Usually, if the categories rotate, you will be notified when the dates and categories change.

Rewards categories include hotels, airline tickets, restaurants, groceries, gas, entertainment, and more. Review your current credit card statements before you sign up for a rewards credit card. Make a note of the categories that you spend the most money in every month and choose a credit card that compliments your lifestyle.

Best Credit Card for You

Extra Features

Depending on which credit card you choose, it may come with extra including but not limited to:

  • Travel insurance
  • Lost luggage reimbursement
  • Concierge services
  • Rental car insurance
  • Mobile phone insurance
  • Roadside services
  • Zero liability for fraudulent purchases
  • Emergency card replacement
  • Emergency cash advance
  • Price protection (for example if a large ticket item you buy goes on the sale, the credit card company will issue a credit for the difference within a predetermined period)
  • Extended warranties on purchases like electronics
  • Cash at checkout (Discover)
  • Purchase protection (if your purchase is damaged or stolen)
  • Return protection (refund even if the merchant refuses the return, usually 60 days)
  • Event ticket protection (American Express)
  • Shoprunner Membership (American Express)
  • Exclusive event invitations
  • Identity theft resolution
  • Free credit score check
  • Budgeting tools
  • Custom photo credit card
  • Temporarily freeze your account

Your credit card should come with a Guide to Benefits in the welcome information. Read this guide before using the card so you can get the most out of your money.

best credit card faq

Types of Credit Cards

If you have good credit that can pay off your credit card balance every month, a rewards credit card can essentially pay you for using their service. Rewards are varied by specific card offerings and can include free or reduced flights, hotel stays, and even cash back.

If you are a student, own a business, or need a little more time to pay off a major expense, there are also credit cards that specifically cater to your needs.

Travel

Travel credit cards are great for people who spend a portion of their year flying, staying in hotels, or even shopping internationally (in person or online).

Travel Credit Cards

Travel rewards cards will offer your points or miles for spending money on purchases and paying your monthly bills. Most of these cards have upgraded versions, which will give you the equivalent in points or miles for a standard annual fee that is usually around $100.

Some travel reward cards offer no foreign transaction fees, the ability to transfer points or miles into vacations or business travel, and even allow you to use your points or miles to purchase gift cards, rental cars, or material goods.

When it comes to traveling, Airbnb has become a necessity for many who are taking a tour around the world. Check out our list of Best Credit Cards for Airbnb – How to Find the Best One & Extra Tips.

Our top three:

Chase Sapphire Preferred Card

You can earn 60,000 bonus points after you spend $4,000 on the card within 90 days after account opening. That equals $750 in redeemable rewards. Easily build points with 2X points on travel and restaurants worldwide and 1 point per $1 on all other purchases.

Pros:

  • No foreign transaction fee
  • Upgraded metal card
  • Comprehensive travel protection

Cons:

  • $95 annual fee
  • Only 2X point on travel and dining

Capital One Venture Rewards Credit Card

Earn 50,000 miles when you spend $3,000 on purchases within the first 90 days after account opening. After completing, you will be rewarded with the equivalent of $500 in travel. 2X rewards on every purchase, 10X miles on select hotels through January 2020.

Use the venture card to travel anytime with no blackout dates. You can also transfer your miles to 12 popular travel loyalty programs.

Pros:

  • Generous bonus offer
  • $0 annual fee for the first year
  • $0 balance transfer fee
  • No foreign transaction fee
  • $100 application fee credit for Global Entry or TSA Pre?®
  • Miles never expire for the life of the account
  • No earning limit

Cons:

  • $95 annual fee after the first year
  • High variable APR (17.49%-24.74%)

The Platinum Card® from American Express

Receive 60,000 reward points after completing $5,000 in purchases within the first 90 days of account opening. A wide variety of airline, commute, and retail statement credits.

Pros:

  • No foreign transaction fees
  • Uber VIP status and $200 in free rides in the U.S. (credit varies monthly)
  • 5X rewards points with flights booked directly with airlines
  • 5X rewards on hotels prepaid via amextravel.com
  • Proprietary lounge access
  • Complimentary hotel and resort benefits totaling $550
  • $200 baggage fee credit
  • Up to $100 annual statement credit for Saks Fifth Avenue purchases

Cons:

  • $550 annual fee
  • Low rewards for general purchases (1 point for every dollar)

Cash Back

If you aren’t a frequent traveler, you may prefer a credit card that gives you cash back. Cashback cards give you a small percentage back on your purchases each month, which you can use to redeem gift cards or withdrawn directly from an ATM.

Cashback cards are beneficial if you spend a decent amount on your credit card each month. If you are interested in this type of credit card, consider paying your monthly bills (utilities, Internet, cell phone, insurance) with this credit card to increase the amount of cashback you can receive.

American Express Platinum Card Cash Back

Cashback cards may have a higher introductory period in which the cashback you receive will be greater for the first year. They may also offer a higher percentage of cashback for different categories like groceries, gas, or dining out.

Our top three:

Capital One® SavorOne® Cash Rewards Credit Card

Best card for frequent restaurant-goers and those who spend money on entertainment. Earn $150 after spending at least $500 in the first 90 days. The card offers unlimited cash back on dining and entertainment (3%), groceries (2%), and general purchases (1%).

Pros:

  • No annual fee
  • Lower intro APR on purchases and balance transfers for 15 months
  • No foreign transaction fee
  • Frequent bonus cashback opportunities

Cons:

  • None

Check out our review on Capital One Savor Rewards Credit Card here.

Chase Freedom®

Receive a $150 credit after spending $500 on purchases in the first 90 days. Earn 5% on rotating quarterly categories (up to $1,500). Unlimited 1% cash back on general purchases.

Pros:

  • No annual fee
  • Free credit score, updated weekly with Credit Journey?
  • Bonus 5% rewards every quarter (rotating categories)
  • Earn more cashback through Chase’s Ultimate Rewards site

Cons:

  • Reward categories rotate quarterly so it can be difficult to maximize rewards
  • Foreign transaction fee

Citi® Double Cash Card

Earn 2% cashback on every purchase, 1% when you buy, and 1% when you pay (must pay at least a minimum payment on time to receive rewards).

Pros:

  • $0 annual fee
  • 2% rewards
  • 0% on balance transfer for 18 months
  • Good for building credit and incentive for paying the bill on time

Cons:

  • No bonus offer
  • 3% balance transfer fee
  • Penalty APR up to 29.99%
  • Foreign transaction fee

Retail

Most major retail stores offer a credit card branded with their company name. If you shop at this particular store often and the store offers cash back or other rewards, you would be wise to use their card for the money savings.

Take advantage of reward bonuses in specific spending categories, which will often get you more store rewards in a shorter period. A retail store credit card can be used for purchases outside the retail store if supported by Visa, MasterCard, or American Express.

Credit Cards Retail Shopping

Retail cards are also good for building or repairing credit as the approval rate is high. However, make sure you put a priority on paying off the balance of retail credit cards as the APR is often much higher than standard credit cards.

Our top three:

Amazon Prime Rewards Visa Signature Card

Perfect for Amazon Prime members and those who frequently shop at Whole Foods. Keep in mind you must keep an active Amazon Prime account to qualify.

Pros:

  • 5% back on Amazon.com and Whole Foods Market purchases (must have Prime account)
  • 2% back at restaurants, gas, drugstores
  • 1% on everything else
  • No annual fee
  • No foreign transaction fees
  • No minimum rewards amount for redemption

Cons:

  • Requires annual Amazon Prime membership (which can increase from year to year)

Target REDcard™ Credit Card

Shop at more than 1,800 Target stores in the United States. Earn 5% off every time you shop and free shipping with no minimum on Target.com.

Pros:

  • 5% off
  • Free shipping on Target.com
  • Extra 30 days for returns
  • Chip-and-Pin cards (more secure than chip-and-signature cards)

Cons:

  • 5% exclusions include prescription, optical eye exams, Target gift cards…
  • High-interest rate (currently 25.15%)

Lowe’s Advantage Card

Receive 5% off when you pay with your Lowe’s credit card. For larger purchases, take advantage of special financing from 6-12 months. When spending $2,000 or more, get up to 84 fixed monthly payments with reduced APR.

Pros:

  • No annual fee
  • No foreign transaction fee

Cons:

  • No rewards
  • High APR

Find out more about the Best Credit Cards for Large Purchases here.

Balance Transfer

Balance transfer cards are best for debt consolidation. They can often extend the time you have to pay back larger balances without additional interest. Most balance transfer cards have a 0% APR for a promotional period of anywhere from six to eighteen months.

Balance Transfer Cards

Balance transfer cards are handy for transferring high-interest credit card debt. Your credit score will often determine how high of a balance you can transfer, and the number of fees you will need to pay, etc.

Our top three:

Discover it® Balance Transfer

A balance transfer card with rewards. Discover matches all of the cash back you’ve earned in the first year. It is automatic, and there is no limit.

Pros:

  • 5% cashback (category rotates each quarter)
  • 1% cashback on every purchase automatically
  • No redemption threshold
  • Rewards never expire
  • Free Credit Scorecard
  • Free fraud protection
  • No annual fee
  • No foreign transaction fee
  • 0% for 18 months on balance transfers

Cons:

  • International rewards are difficult to receive
  • Hard to maximize rewards with rotating categories

Capital One® Quicksilver® Cash Rewards Credit Card

Receive a $150 credit after spending $500 on purchases in the first 90 days. Unlimited 1.5% cash back on every purchase. 0% intro APR on purchases for 15 months.

Pros:

  • No minimum redemption for rewards
  • No annual fee
  • No foreign transaction fee
  • Sign-up bonus

Cons:

  • Short intro APR period
  • No bonus reward categories

Chase Freedom®

Receive a $150 credit after spending $500 on purchases in the first 90 days. Earn 5% on rotating quarterly categories (up to $1,500). Unlimited 1% cash back on general purchases.

Pros:

  • No annual fee
  • Free credit score, updated weekly with Credit Journey?
  • Bonus 5% rewards every quarter (rotating categories)
  • Earn more cashback through Chase’s Ultimate Rewards site

Cons:

  • Reward categories rotate quarterly so it can be difficult to maximize rewards
  • Foreign transaction fee

Students

Student specific credit cards are often promoted on college campuses or at events where students frequent. These credit cards are appealing to students because they offer perks like late payment forgiveness and rewards related to academic grades.

Student Credit Cards

Low threshold purchasing bonuses are great for students who are just starting out and often don’t have a high monthly spend. A student credit card, if used properly, can be used to help quickly build credit.

Our top three:

Journey Student Rewards from Capital One

Created for students, get a bonus for paying on time. Easy to understand rewards, and you can apply even if you are not a student. 1% cashback on all of your purchases, boost it to 1.25% if you pay on time.

Pros:

  • Only need average credit to qualify
  • No annual fee
  • No foreign transaction fee

Cons:

  • High APR (26.46% variable)

Discover It Student Chrome card

Great for frequent purchases of gas and restaurants. Not recommended for international use.

Pros:

  • 2% cashback on gas stations and restaurants (up to $1,000 in purchases each quarter)
  • No FICO history needed
  • Bonus cash back categories
  • No annual fee
  • No foreign transaction fee

Cons:

  • Short intro APR

Discover It Student Cash card

Great for frequent purchases of gas and restaurants. Not recommended for international use.

Pros:

  • 5% cashback on rotating categories each quarter (must activate)
  • No FICO history needed
  • Bonus cash back categories
  • No annual fee
  • No foreign transaction fee
  • $20 statement credit each school year for 3.0 or higher GPA
  • Free credit score
  • Freeze It® on/off switch for your account
  • Fraud protection

Cons:

  • Short intro APR

Business

Business credit cards were created to make business purchases easier in a team setting. They can easily be used to buy everyday purchases like office supplies and necessary monthly expenses like Internet and shipping costs.

Business Credit Cards

These credit cards often allow multiple copies of the same account so that employees can have their own to make department related purchases. Year-end reporting is available to make taxes and budgeting meetings a breeze.

Our top three:

Capital One® Spark® Cash for Business

Earn 2% unlimited cash back for your business, every day, everywhere. Earn a $500 cash bonus when you spend $4,500 within 90 days of account opening.

Pros

  • High rewards rate
  • No annual fee for the first year
  • No foreign transaction fee

Cons

  • $95 annual fee (after the first year)
  • High APR

Ink Business Unlimited Credit Card

Great for small businesses that prefer a flat reward system. If you prefer bonus category rewards, there are better cards available.

Earn $500 cash back after spending $3,000 within the first 90 days after account opening.

Pros:

  • Unlimited 1.5% cashback
  • 0% intro APR for 12 months
  • Additional employee cards for no fee
  • No annual fee

Cons:

  • Foreign transaction fee

Discover it® Business Card

Automatically get an unlimited dollar-for-dollar cash back match at the end of the first year.

Pros:

  • 1.5% cashback on all purchases
  • No foreign transaction fee
  • No penalty APR
  • Free employee cards
  • Free fraud protection
  • Intro APR benefits

Cons:

  • No upfront bonus
  • Better cards for big spenders
  • No balance transfer incentive
  • No travel benefits

Building Credit

Building your credit is essential for purchasing your own home, car, and investing. Credit cards are an easy way to prove that you can pay off larger purchases on time.

Start with a small credit limit and consistently pay off the balance you borrow every month. This is also great for repairing bad credit.

Best Credit Cards Building Credit

Our top three:

Discover it® Secured

Automatically get reviewed after eight months, upgrade to an unsecured card, and get your deposit back. Build a credit history with the three major credit bureaus.

Pros

  • No annual fee
  • Reports to the three major credit bureaus
  • Offers rewards and a sign-up bonus
  • Upgrade to an unsecured account after eight months (if credit is good and payments are made)

Cons

  • $200 minimum deposit
  • Not accepted at many places internationally

Capital One® Secured Mastercard®

Automatically get a $200 credit line after making a security deposit of $49, $99, or $200. Increased credit line after making your first five monthly payments on time.

Pros

  • Builds credit with three major credit bureaus
  • Accepted worldwide
  • Qualify with limited/bad credit
  • No annual fee
  • No foreign transaction fee

Cons

  • No rewards
  • High APR

Citi® Secured Mastercard®

A security deposit of $200 is required. The card helps build credit with the three major credit bureaus.

Pros:

  • No annual fee
  • Free access to FICO score
  • Autopay
  • Flexible payment due dates

Cons:

  • No bonus offer
  • High APR
  • Balance transfer fee
  • Foreign transaction fee

Credit Card Advantages

Convenience

Let’s face it in a modern world; paying with cash is a hassle. You have to constantly go to the bank to get the cash you need, and having the correct change is difficult at best.

A credit card can be used at a physical store and online. It makes payment at the checkout much faster, and it allows you to track your daily spending quickly.

Although the convenience factor can make it easy to overspend, if you use credit cards wisely, you can benefit from rewards such as cashback or travel and build your credit at the same time.

Credit Card Advantages

Budgeting

Using a credit card can make monthly budgeting a breeze. No more cash in envelopes and lost paper receipts. You can easily use a credit card for your purchases and have a real-time account of your spending total and habits.

Most credit cards will even categorize your spending so you can see if you are spending too much in one area and work on that specific category.

Plus, if you choose a benefits credit card, you can earn rewards points for cash back, travel, and more just for paying your bills and making purchases with the card.m

Credit Card Fine Print

All credit cards have an entire booklet of fine print. Before choosing a credit card to consider the promotion APR, standard APR, and annual fee. It is important that you also take into account any penalties that the credit card issues if you lose your job or have an emergency expense and can’t afford to pay on time. The more you educate yourself on credit card terms, the less you will have to worry about dealing with credit card debt.

Rising Rates

Credit card companies are not allowed to raise your rate for the first year after you choose and start using their card. However, there are exceptions to this rule.

  • Your credit card rate is not fixed. When you have a variable rate credit card, your rate will go up and down with the market.
  • Your introductory rate only lasts a minimum of six months, and the higher standard rate takes effect.
  • You fail to pay your bills and are sixty days past due.

Keep in mind, once you have your card for twelve months, a creditor is allowed to change the rate. The creditor must notify you directly of the rate change.

Balance Transfer Fees

It is common for credit card companies to charge you a fee to transfer a balance from one credit account to another. You may be enticed by an offer you receive that will give you 0% APR for several months (usually six to eighteen).

However, in the fine print, you will see that they will charge you a one-time fee based on the balance you are transferring. For example, if you plan to transfer $5,000 and the credit card company charges you a 3% fee, you will have to pay back an extra $150.

When transferring a balance, never stop making payments on the original credit card. It can take a considerable amount of time for the credit card companies to talk to each other and get your balance transferred.

If you are transferring a balance to make only the minimum payments for a few months, start the transfer process as quickly as possible, or you may be hit with fees that will leave a balance on your old account.

It is important to note that you cannot transfer a balance from a Capital One card to another Capital One card, for example. To get a better deal, you must seek out other credit companies to transfer your current balance to (i.e., Capital One to Chase).

Tip: You generally have ten days to reverse a balance transfer. If you realized you had made a mistake, act quickly before you are stuck with the new credit issuer.

Variable APR

Variable APR is a base interest rate plus a margin that is created based on your credit history. There are several things that you need to consider before choosing a variable rate APR credit card.

Your credit issues don’t have to tell you when the rate changes. The new rate can be easily missed if you don’t scrutinize your monthly statement.

When the base rate changes, the overall APR can change. This can happen frequently. If you hear that the Federal Reserve is considering raising its rates, plan for your credit card APR to be negatively affected.

Your variable rate credit card may have different rates for purchases, cash advances, penalties, and balance transfers.

If your credit score drops, your variable rate APR will increase.

If your financial situation improves (i.e., income and credit score improves), shop around for a better credit card that has a lower fixed APR. Reward yourself for being financially responsible and ditch the roller coaster credit card.

FAQ

How Will You Use Your Credit Card?

Before searching for a new credit card, determine how you will be using that credit card. Will it be for everyday spending, high-interest debt, or business expenses?

There is a credit card for every type of financial use, so choosing your intended purpose should not limit your options. Always choose a mainstream credit card that you are comfortable with that gives you the most benefits.

Should You Pay an Annual Fee?

While most people should choose a credit card that does not have an annual fee, there are certain situations in which investing in your credit card makes sense in the long run.
Benefits. If you pay an annual fee of say $100, make sure that you receive points, miles, or bonus incentives to offset or match the cost. You should also choose a credit card based on your hobbies (i.e., only choose a flight credit card if you plan to fly at least once yearly).
Do the math. Some people discount yearly fee credit cards and do not consider them. Usually, annual fee credit cards have better rewards and make more sense for people who use credit cards for all of their purchases (including bills) and pay off their balance in full each month.
Lower interest charge. If you are carrying a higher balance and the credit card with an annual fee has a lower APR, it is worth paying the annual fee instead of higher interest charges.
Sign-up bonus. A sign-up bonus on a credit card that has an annual fee might not be worth the hassle, especially if the annual fee and sign-up bonus are within a few dollars of each other. If the sign-up bonus is still appealing to you, consider canceling the card after the initial 12 months to avoid possible higher APRs and an annual fee with a lack of benefits to offset the upfront cost.

What Happens When You Carry a Balance on Your Credit Card?

Carrying a balance on your credit card can put both your bank account and credit score at risk. If you do not pay your monthly balance in full, you will be charged interest on the amount that is left. If this turns into a habit, your credit utilization will increase, which lowers your credit score and makes it harder to get additional credit cards and loans.

Final Thoughts

There is no one credit card for every person. Choosing a credit card is a personal decision based on what your credit allows you to qualify for, your particular lifestyle, and the purpose you need a credit card for.

Once you have narrowed down your credit rating and preferred use, you can begin to compare credit card offers and benefits. Most major credit card applications are online, so you can quickly apply and see if you are approved. If you receive instant approval, you will often be able to see your credit limit and standard APR.

Sometimes when applying for a credit card, the credit issuer will need to review your credit history further to see if you are a good candidate for their card or to determine your credit limit. If this happens, be patient. Especially when you are building credit, this can happen. When you receive the credit decision, work with the credit issuer to see how you can improve your credit to qualify or how many months you need to pay to increase your credit limit.

Remember always to use credit cards responsibly. Any rewards you receive will be negated if you do not make your payments on time or do not pay your balance off in full every month.

Further Research