However, the best card for you will most likely fall into one of these groups. Consider which option makes the most sense for you in light of your credit history and plans.
Do you need to establish credit? Get a credit card that will help you build your credit.
Credit-building cards, intended for persons with bad credit or short credit history, can help you build or restore your credit if used wisely. That includes, among other things, paying off your accounts on schedule and keeping your credit utilization low. And, because they’re aimed towards those with less-than-perfect credit, they’re usually rather simple to obtain.
Credit-building cards are classified into three types: secured credit cards, unsecured credit cards, and student cards.
Secured cards function similarly to standard credit cards, with one important exception: they require you to put down a security deposit when you apply for a card. Your deposit is usually equal to your credit limit and is refunded when you close the card or switch to an unsecured card.
As the name suggests, insecure credit-building cards do not require a security deposit but are aimed towards individuals with bad credit. Because no deposit is required, lenders are more likely to approve customers for these cards. As a result, unsecured credit-building cards frequently charge higher interest rates and have lower credit limits.
Student cards can be protected or unsecured, but they are usually only available to current students. These cards typically have lower fees than regular credit-building cards and may have student-specific bonuses.
Whatever path you select to earn credit, credit-building cards should be viewed primarily as stepping stones to better cards later.
Do you need to pay off your debts? Get a credit card with a balance transfer option.
Insurance for mobile phones
These are the most common benefits provided by credit cards. However, there are many more. Keep these benefits in mind as you proceed through the next steps.
Consider credit card costs.
Next, consider whether you’re willing to spend an annual fee on a credit card. Again, there is no right or wrong answer here, but it might be beneficial to consider these fees in terms of the value you receive in return.
The Chase Sapphire Reserve®, for example, has a $550 annual fee but includes:
- A $300 travel credit each year.
- A Priority Pass Select airport lounge membership.
- A credit toward Global Entry or TSA Precheck.
- A large initial sign-up bonus.
Given that you’ll receive $300 in travel credits each year and that a Priority Pass airport lounge membership with unlimited visits typically starts at $429 per year on its own, this card is a fantastic offer for a frequent traveler despite the annual charge.
Other cards have lower costs, but their first-year welcome bonuses and cardholder benefit more than compensate. Here are some questions to consider when deciding if annual fees are worthwhile:
Is your credit good to excellent? If not, you may be required to pay an annual fee for a negative credit card or an upfront security deposit to obtain a secured credit card.
Steps to follow
Once you’ve analyzed these considerations and established which types of cards are a good fit for your credit profile, goals, and budget, it’s time to zero down on specific cards and apply when you discover one.
