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5 Questions to Ask Yourself Before Choosing a Credit Card

What you'll learn: What to know before choosing your credit card


Considering getting a new credit card? Before you sign up, take a deep breath… and answer these five questions, which will help you find the right credit card, no matter what your financial situation.

What will you use the card for?

Though it may seem like the answer is simple — to buy things, of course! — you don’t want to overlook this basic question, because it will help you pick the perfect card for your needs. Are you looking to get out from under other credit card debt? Then you probably want to look for cards with balance transfer offers. Trying to leverage the power of credit card reward points? Then you’ll want to compare reward cards to see which one will give you the best returns. If you’re only after a card to cover emergency spending, you’ll want to overlook extras and focus on avoiding fees.

So before sending in your application, take some time to consider what you need out of this card — knowing that will make it a lot easier to pick the right one.

What are your spending habits?

Be honest here: how do you usually use your credit cards? Not sure? Then start by taking a look at past credit card statements to see what your typical spending habits are, because this is another piece of information that can help you find the right card for your financial situation.

Do you tend to run balances? A card with a low APR is a must to minimize the interest you’re paying. Do you tend to pay your card off every month? Then you’ll get great value out of a reward card. Do you sometimes need to make large purchases? Then you’ll want a card with a high enough credit limit to handle them.

What’s your credit score?

Your credit score is a key component to getting approved — or getting the best interest rates — for a credit card. Fortunately, getting your score is easy because many PenFed members are eligible to get their FICO Score for free through PenFed Online Banking. Because inquiries about your credit score by credit companies can decrease your score slightly, it’s best to go in knowing your score as well as what kind of score you’re likely to need instead of applying for several cards and hoping to get one of them.

If you have bad credit or no credit, you may be better off getting someone to co-sign for a card (like a parent or other family member) or applying for a secured card (which requires a down payment up-front). Though these aren’t likely to be the best deals on cards, they may be the only options available in certain cases.

What are the card’s costs?

All credit cards have an APR (or annual percentage rate, which is the interest rate you’ll pay on your balance), which may vary month to month depending on the prime rate (or other financial indicator). The rate may also be higher for certain types of transactions (often balance transfers will have a higher interest rate, so pay attention if you intend on transferring a balance) and can change to a “penalty rate” if you’re late on a payment.

You’ll also find cards loaded with fees. Some — typically rewards cards that have lots of perks — will have an annual fee that you have to pay once a year no matter what you do with the card. There are also often fees for international transactions, balance transfers, cash advances, late payments, and plenty of other things.

Before you sign on the dotted line, make sure to read the Schumer box that details the card’s terms as well as going through the fine print. Though you should expect all cards to have fees, don’t be tempted by great rewards if the terms of the card aren’t reasonable. Instead of winding up saddled with unexpected costs, pay close attention to the terms before you sign.

What are the card’s benefits?

Every credit card has an appealing set of benefits to convince you to apply for it — but are a card’s specific benefits an ideal for your needs? If you’ve answered the questions above, you should have a good idea of what’s important to you in a credit card, so you know the benefits you need as well as the ones that might not matter.

When you’re shopping for new cards, pay attention to just what each card has to offer — rewards? other perks? great interest rates? — and how well those things match your needs. When you’ve narrowed the list down, consider which card offers you the best benefit for the lowest cost — chances are, that’s the card you want.

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