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Credit Guide: Finding the Credit Card for You

Most credit cards work the same way - you borrow money and repay it according to the terms of the card agreement. However, depending on your unique financial needs, there may be significant differences in card terms, costs, and benefits. There's no such thing as the "best" credit card, but you can find the best card for you.

When looking for the best card for you, remember the difference between soft and hard credit inquiries. A soft inquiry happens when lenders screen you for preapproved offers and doesn't affect your credit score. When you apply for credit, that's a hard inquiry and affects your credit, typically to a small degree. However, applying for many credit cards in a short period can affect your credit score. So, narrowing your choices to a card or two before applying is best.
Since fees, interest rates, penalties, and perks can vary widely between cards, here are some factors to consider when looking for the best deal.

Your Credit Score

Knowing your credit score will ensure you apply for the best card possible. As your score increases, costs decrease, and you get more card options like points that can be redeemed for cash or credit towards other services. And for those with poor credit, secured cards can help you rebuild credit, even though no borrowing is involved.

If you don't know your credit score, you can access your free credit report through annualcreditreport.com. 

Once you know your score, here's what it means:

750-850 Excellent

690-749 Good

630-689 Fair

300-629 Poor

When you search for a card, you'll find that most offer some description of the expected credit score range. If your credit rating is under the required range, save a hard credit inquiry for other cards with a higher chance of approval.

Your Spending Behavior and Reward Options

Suppose you already have a high credit card balance and tend to carry a balance from month to month. In that case, you'll likely focus on cards with lower interest rates and balance transfer deals. Look for cards offering a 0% introductory APR on balance transfers, which can help you pay off your debt faster by minimizing interest charges. Be aware of balance transfer fees, typically a percentage of the transferred amount.

If you consistently pay your balance in full, you'll want to focus on the perks that matter most to you - from cash back to travel points. Cash-back cards offer a percentage of your spending back as a statement credit or direct deposit. Travel rewards cards let you earn points or miles that can be redeemed for flights, hotel stays, and other travel-related expenses. Some cards offer rotating bonus categories, while others provide a consistent rewards rate across all purchases.

When exploring card options, the cards with the lowest fees and most generous benefits are restricted to those with good to excellent credit. Still, there can be significant differences between cards – no matter your credit score. Some cards may offer extended purchase warranties, trip cancellation coverage, lowest price protection, and more. Not taking advantage of your eligible benefits is like leaving money on the table.

Another consideration, especially when exploring cards that offer generous benefits, is whether or not the card charges an annual fee. It's crucial to understand whether the benefits provided by the card justify the fee - sometimes several hundred dollars per year. 

Comparing Card Costs

Federal law requires that you receive a Federal Truth in Lending Disclosure Statement from any credit card company before you open a credit card account. The statement must include specific account fees, why penalty rates may be applied, and terms applicable when the account is opened. It also tells you all the rules and fees associated with your credit card account.

The Schumer Box

Named after the senator from New York, the Schumer Box is a table that discloses critical facts about a credit card, including interest rates, fees, terms, and conditions. It includes:

The interest rates for purchases, balance transfers, and cash advances

Any grace period before interest is charged

How to avoid paying interest

Minimum charges

Annual fee

Transaction fees

Penalty fees

When shopping for a card, this box will help you compare cards. A clear understanding of how interest is charged and when penalty fees and interest rate increases would be triggered is critical. Compare benefits for cards with similar costs as described in their marketing materials. Pay close attention to the annual percentage rate (APR) for purchases, as this is the interest rate you'll pay on any balances you carry from month to month. Also, note any foreign transaction fees if you plan to use your card while traveling internationally.

Finding a Credit Card

There are dozens or even hundreds of credit card comparison websites on the internet, and virtually all of them have one thing in common – they're paid when you sign up for a card they promoted. A credit card may not be listed if it doesn't pay a referral fee. So comparison sites could best be described as "comparing cards for which we're paid a referral fee."

Card comparison sites may offer many options, but what if the best card for you isn't on those websites?

One strategy would be to use comparison sites to get a broad sense of the options available for people with similar credit scores. Then, do something the comparison sites wouldn't expect: contact your bank or credit union. Financial intuitions continually compete with one another, so a competitive card offer could be closer than you expect. Many banks and credit unions offer credit cards with competitive rates and rewards, and they may be more willing to work with you if you already have an established relationship.

Another option is to check with professional organizations or other associations you belong to. Some of these groups offer co-branded credit cards with exclusive benefits and rewards tailored to their members.

Ultimately, the best credit card for you will depend on your financial situation and spending habits. By understanding your credit score, comparing costs and benefits, and exploring your options, you can find a card that helps you make the most of your money.