What’s your credit score?
The better your credit score, the better your chance of qualifying for a credit card with excellent perks and terms. You can review your credit report by requesting a free copy from AnnualCreditReport.com and check your credit scores for free through your issuer or a credit bureau. If your credit score isn’t where you’d like it to be, work on improving your credit.
Do you plan to carry a balance?
It’s best to pay your balance in full each month so you avoid paying interest, but a low-interest credit card may be wise if you expect to carry a balance from time to time. Low-interest cards tout APRs that are lower than the average credit card interest rate, which has been hovering around a high 20 percent.
Once inflation dies down, low-interest cards may return to their typical 11 percent to 15 percent minimum APR range. Credit union cards can be an especially good option since they’ve been known to offer even lower rates, with low-end APRs sometimes ranging from 8 percent to 14 percent.
Are you looking to pay off debt or a large purchase?
If you only need 12 to 15 months to pay off your balance, a no-annual-fee rewards card with a short intro APR period may be your best choice long term. Otherwise, cards designed specifically for balance transfers or financing new purchases will be a better fit since they tend to offer 0 percent APR periods of 18 to 21 months.
What are your spending habits?
If your spending is concentrated in a certain area, look for a card that earns rewards at a high rate in that category. For example, if you spend a lot on groceries, look for a credit card that offers bonus points or cash back at grocery stores. Alternatively, consider a card that offers miles if you travel frequently. If you don’t spend a lot in one particular category, consider a card that earns rewards at a flat rate on all purchases.
Flat-rate rewards cards typically offer a maximum of 2 percent cash back or 2X miles on purchases, while cards with rotating or year-round bonus categories can offer anywhere from 2 percent to 6 percent back on certain purchases (sometimes with a few restrictions on how much you can earn).
Can you earn a sign-up bonus?
Many credit cards carry a sign-up bonus for new cardholders. The typical sign-up bonus offers cash back, points or miles after you spend a certain amount of money within a specified timeframe, usually within your first three months as a cardholder.
No-annual-fee rewards cards typically offer sign-up bonuses worth $200 to $250 after you spend $500 to $1,000 in the first three months. Meanwhile, premium rewards cards generally offer bonuses worth $500 to $800 after you spend $4,000 to $6,000 in your first three or six months. Business cards often offer even more valuable sign-up bonuses with a bigger spending requirement to match.