Our credit expert Jason Steele is a master of credit cards. Even we’re amazed every time he takes international vacations with his whole family for free; he also manages not run into trouble with the debt, either. So, the credit card reviews here are advice you can trust. Whether you have bad credit or need the best reward or travel credit cards around, we’ve got you covered.
7 Key Features to Consider When Choosing the Right Credit Card
#1: Pay attention to the rates… all of them
APR is probably the most important feature on your credit cards. Rewards are great, but if incentives get offset by high interest charges, you don’t actually earn anything. So, you need to know your credit score and understand where average credit card APR sits today.
As you look at each card, consider all the rates that can apply to your debt. Note how long introductory or promotion APR applies. Then evaluate the rate you’ll pay when that period ends. Check balance transfer APR and the rate for cash advances. Finally, take note of penalty APR, to know what you could face if you miss a payment.
#2: Fees matter – particularly annual fees
In general, unless you’re well-versed in using credit frequently without causing debt problems, you should avoid annual fees. Many credit cards don’t have them; they usually only pop up on account that offer the biggest reward programs. However, that means you have to use the card regularly to earn enough to offset a high annual fee. Don’t use these cards if you don’t have experience at managing credit card debt.
Be aware of other fees on the account, too. You can pay additional fees for balance transfers and cash advances. Many cards also have special transaction fees, such as foreign transaction fees if you travel.
#3: Grace periods are great if you can find them
A grace period is a set period of time after your payment due date that you can pay without penalties. Grace periods used to be pretty common, but not so much these days. If you have trouble remembering to make payments, grab one of these rare credit unicorns if you can find it.
#4: Consider credit limits carefully
High limit credit cards can be useful to extend your purchasing power. However, they can also lead to high levels of debt that can be tough to pay off. A higher limit is not always the better choice. Limiting your credit limit helps you avoid debt problems and limits your liability if someone steals your card.
Also be aware that credit limits can affect your credit score. Credit utilization ratio is the second most important factor in FICO scores. It measures your current balance versus your total available credit limit. If you have high limits and low debt, it’s good for your score.
However, in early 2017 the credit bureaus announced they will change their scoring formula, the VantageScore. Their model will count down for higher limits on more cards, because it means more potential to run up debt. The changes will take affect later this year.
#5: Can your card go where you go?
Make sure the credit cards that you open are accepted at enough places to make them useful. The wider the range of places you can use a card, the more useful it will be. If you travel internationally, make sure your cards can be used anywhere you want to go.
Only open a retail store credit card if you shop at that store frequently enough to justify having the open account. Remember that credit cards can close if you don’t use them; there’s no point in creating a hard inquiry and extra credit line that you don’t really need.
#6: Be aware of reward restrictions
Wonder why we’re focusing on reward restrictions instead of the rewards, themselves? It’s because a credit card reward program is only as good as the restrictions it places on you. Rewards programs usually offer greater earnings with more restrictions; if you want to earn rewards with every purchase, expect them to be lower.
Figuring out which rewards you want and how to use them to get the most out of your accounts is crucial. Finding the right balance of reward credit cards to use in different situations can help you minimize interest charges, too.
#7: Assess the added perks
Most new credit card accounts offer other added perks to your account, too. From enhanced fraud protection programs to credit scores and credit tracking, these benefits can make a big difference. You don’t need three cards that offer your FICO score, but if one of them does it can be beneficial.
How many credit cards should one person have?
This question varies based on the credit user. Cardholders like our expert Jason Steele have dozens of cards and not run into trouble with debt. Other people can cause debt problems if they have just one card.
In general, you should open an account when you have a clear, specific need for that card. For most people, having 2-5 credit cards is enough. You may have a general rewards credit card, a gas card, a travel miles card and a low-interest card for bigger purchases.
That being said, some credit score models give you points for having more accounts open. They want to see that you have a wide range of accounts; so having anything less than 10 accounts is not as good as having more than 10. However, even on the models that count this factor, it has a low impact. It also factors in account age, so having older accounts is better, too.
So, in conclusion, you should not open up cards just for the sake having more accounts. The credit score benefit is not enough to offset the potential for debt problems. Only get the cards you need and if it’s only 2-3 accounts, just keep them in good standing; you can still achieve an excellent credit score.