Financial management is tough, especially if you’re doing it on your own. How do you balance debts, bills, and savings? How do you know which financial decision is a good one? One of the biggest topics of discussion when it comes to financial management is credit cards. How do you choose the right credit card? Let’s take a closer look.
4 Steps to Pick the Right Credit Card for Better Financial Management
With a variety of options available and great marketing tactics by credit card companies, picking a credit card can be overwhelming. It’s particularly important to look past those attractive bonus offers and pick a credit card that works best for you. That’s why we’re offering up some easy steps to help you make the right choice. Here you go!
1.Review Your Credit
Before you make any decisions, it’s important you take a look at your current credit score. While there may be a bunch of different credit card options to choose from, they all have one thing in common. It’s necessary for any lender to check your credit before they decide whether or not you qualify for an account.
In addition to approval, your credit score will determine the terms of your account. Things like APR and credit limit rely heavily on your current credit history and your past activity with loans and credit cards. Remember, you don’t have just one credit report, you have three! So, you likely won’t know which credit report the lender plans to pull. That’s why you should be aware of all three reports and scores before you apply for any type of financing or credit card.
The great news about reviewing your credit is that you can get a free credit report annually. While there are also several free companies that allow you to track your credit score, the Fair Credit Reporting Act requires you have access to a full report once a year. You can get access to your annual credit reports from all three credit bureaus here.
Once you have access to your reports, take some time to review them. Check them over thoroughly to identify any potential errors. Issues with your credit report can lower your scores and keep you from getting the approvals, limits, and interest rates you deserve. Dispute any mistakes you find with the credit bureaus.
2.Determine Your Qualification Odds
Now that you know what your score is, it should be easy to tell if you at least fall within the range of good qualification odds. Most credit card companies offer insight as to who will qualify for their cards. Based on our credit score, you can choose cards for people who fall within the following categories:
- No credit or bad credit
- Fair credit
- Good credit
- Excellent credit
Lenders generally classify credit scores in the following way:
- 300-650– No Credit or Bad Credit
- 651-700– Fair Credit
- 701-759– Good Credit
- 760+– Excellent Credit
If you fall into the no or bad credit category, it’s probably best to focus on getting out of debt and building your credit gradually than trying to apply for additional cards. You certainly don’t want to throw out a Hail Mary and apply for a card that requires good credit for approval. Additionally, if you have excellent credit, you don’t want to waste your time applying for offers that don’t bring any value to you.
If you’re uncertain about how you may rank with a lender, call them and discuss your credit. Ask what it typically takes to get approved for their cards. Remember, every lender reviews your application differently. But your credit score isn’t the only thing that holds weight when it comes to approval. The only way to truly find out if you will qualify is if you apply. But it’s good to have an idea of your odds before you waste your time.
3. Explore Credit Card Features
While financial management should be at the top of your list when choosing a credit card, the features of your card will matter as well. Explore the different types of cards available. Narrow down the types of card that present good approval odds for your current credit situation. Then decide what features of these cards will work best for you.
Here’s a breakdown of the common credit card features based on the type of credit you have. Check out your options and see which will work best for your current situation. Which card gives you the best financial management options and offers features that meet your needs?
No Credit or Bad Credit
If you have no credit or bad credit, you shouldn’t feel like you’re stuck. The good news is that plenty of people have dealt with bad credit and worked their way out of it. The key to growth is following the right steps to rebuild yourself. When your credit history is bad, you need to focus on re-establishing yourself. You can take one step towards that direction by finding a credit card that will help you establish credit.
Keep in mind that it may be difficult to find a lender who wants to work with you. If your credit history is bad, you may present as a risk to lenders. But, there are lenders that offer cards to people with damaged credit. The options you’ll have are:
- Secured credit cards that require you to make a security deposit with the bank. The deposit will be equal to your starting credit limit. It’s basically like an insurance for the lender. If you fail to meet your financial obligations, the lender will keep your deposit. As time passes, the lender may increase your credit limit and eventually return your security deposit.
- Subprime credit cards can be secured or unsecured. They as often advertised as student cards or marketed to people who have yet to establish any credit. These are usually best for people just starting out. If you’re establishing your credit from scratch, this can be a good option. The secured version may be the right choice for those looking to re-establish their credit.
Both of these credit card accounts are likely to have high interest rates, additional fees, and lower limit thresholds. The return on this is that they can easily help you establish your credit and build a better score. They’re the stepping stone to better credit card options.
Fair Credit
Although you may think that fair credit limits your possibilities, you will notice that you have more options than you think. Obviously, you won’t qualify for higher level rewards cards just yet. But, you can benefit from lower APR while you continue to build better credit. If you’re able to pay off your credit card balance each month, this will be even better. You will be on track to better rewards cards and lower APR before you know it. The key is consistency.
Good Credit
No to the good stuff! Good credit ratings open the door to cards with attractive features and rewards. Some popular options for individuals with good credit include:
- Travel rewards cards that give you points or rewards that can be used for future travel. Points build up every time you make a purchase. Since there are a lot of travel rewards cards available, do some research to find which offers the biggest rewards.
- Cashback rewards work in a similar way. They usually give you a % back for the amount you charge each month. These are a great option because you can find ones with no annual fee. It’s a win-win!
- Balance transfer cards can help you transfer outstanding balances from higher percentage rate cards. The lower percentage rate will help you save money and boost your score.
- Low-APR cards don’t necessarily give you anything back. They are a huge benefit to individuals who carry a balance each month. They’ll save you money on expensive interest fees.
Once you decide the best option for financial management, have fun with these cards. You’ve got good credit and you’ve earned the benefits of that! Therefore, you can find credit cards that offer features that fit into your lifestyle.
Excellent Credit
Earning excellent credit takes hard work. If you fall into this category, congratulations! You’ll find that lenders will want you as a customer. You’re reliable and consistent! This gives you the chance to benefit from the most attractive rewards, sign-up bonuses, and interest rates the industry has to offer. Some cards offer 0% interest for a period of time. Others offer upfront cash bonuses just for signing up.
Have fun picking a card. But be sure you check the fine print before you commit. Keep a close eye on APR rates and annual fees. If the benefits outweigh an annual fee, then go for it! If not, keep searching!
4. Go Apply
Now that you’ve taken all the steps to prepare yourself, it’s time to apply! The only way you’ll know if you’re approved is if you do this. If you get denied, don’t lose hope. You can always call the credit card issuer and ask them to reconsider. Or you can find ways to improve your credit, try again in the future, or find another card you will be more likely to get approved for.
Now that you know what it takes to get the best financial management option for your family or business, it’s important to manage your credit card like a pro. Make your account work for you. Take advantage of the benefits and use your new credit card to help you build stronger credit. Don’t drive yourself into debt, pay your bills late, and bring your credit down now that you have your new card.
If you’re looking for guidance to find out which credit card option will be best for you and your future, consider talking to a financial management professional. They can help you make better decisions and set yourself up for increased success. Invest in yourself now and you’ll invest in your future!
For more information on how to build your credit and make smart financial management decisions, visit our office locations in Los Angeles, CA and Tampa, FL. Give us a call at 888-641-4208 for assistance.