How To Choose A Credit Card (2024)

When you’re choosing a new credit card, there are a few steps to take. First, check your credit score. If you have a low credit score, you may be denied for cards that require a higher score. It’s best to remove those cards from consideration to increase your chances of approval for the card you select.

Next, familiarize yourself with the application or eligibility requirements for different credit cards from different issuers. Some banks or issuers will deny you for a new credit card if you have too many new cards or a lot of recent inquiries on your credit report. Chase, for example, has an unofficial rule known as “5/24” which means that they will not approve you for a new credit card if you have opened five or more new credit cards within the past 24 months.

Finally, determine what you are hoping to get out of your new card. Do you need to make a large purchase that you’ll pay down slowly over time? You’ll likely want a credit card that offers a low interest rate or even a 0% introductory APR. Plan to spend a lot on groceries? Then maybe a card that offers bonus rewards at supermarkets is right for you. If you travel frequently and want airport lounge access and travel protections, like trip delay insurance or baggage delay insurance, then a card with extensive travel benefits may be your best bet.

You may begin with a long list of potential credit cards, but considering these four important factors can help you narrow down what card to get.

Welcome Bonuses

Many credit cards come with welcome bonuses to entice potential new customers. You typically need to spend a specified amount of money within a specified timeframe in order to receive the bonus. These bonus offers can be in the form of travel rewards (like points or miles) or cash back (usually as a statement credit). You’ll want to compare the current welcome offers and target the best and highest bonus when choosing a credit card.

Perks and Benefits

Benefits can vary depending on the type of card, so you’ll want to review what each card offers to make sure it matches up with your needs. Some cards have very few or even no perks, while others have extensive benefits. Common benefits on all types of credit cards can include travel insurance protections, purchase protection, extended warranty, cell phone insurance and rental car insurance.

Co-branded credit cards, such as ones specifically tied to an airline or hotel, can include benefits like free checked bags or hotel elite status. And premium credit cards often include annual or monthly statement credits for certain travel or lifestyle purchases and airport lounge access.

Annual Fees

The annual fee is another consideration. This is a fee charged every year you have the card. Some cards have high annual fees and some have minimal or no fees. Typically, the higher the annual fee is, the more perks and benefits you receive to justify paying the higher cost. Low- or no-annual fee cards tend to have fewer perks.

If a card has a high annual fee, but the perks and/or welcome bonus are valuable to you, it can be worth signing up and paying the fee for at least the first year, then reviewing your needs the next year to decide if you should continue to keep the card and pay the annual fee.

Interest Rates

Ideally, you should pay your balance off in full and on time each month. But if you do need to carry a balance or you have a balance from an existing card to transfer, you’ll want to consider the interest rate on any new credit card you get. There are cards with introductory promotional rates that can be useful if you know you’ll pay off balance within that time period.

There’s still one more piece to the puzzle—and that is deciding between the various types of credit cards. Here are some of the most popular types of credit cards and what to consider when selecting one.

Choosing a Business Credit Card

If you’re a business owner—whether you have a small side hustle or a big company—a business credit card can be a valuable spending tool. Having a business credit card allows you to keep your business expenses separate from your personal expenses and can provide easy tracking of spending.

Business cards can also offer rewards, and some cards have generous welcome bonuses as well. Your primary decision when choosing a business credit card will be whether to earn travel rewards or cash back. Some business cards offer elevated rewards for spending in certain categories not found on personal credit cards, such as advertising, shipping and technology providers.

Choosing a Travel Credit Card

There are two types of travel credit cards: Ones that offer flexible travel rewards and ones that are co-branded as a result of an airline or hotel partnership. Flexible travel rewards programs, such as Chase Ultimate Rewards®, Amex Membership Rewards or Capital One Rewards, typically can be transferred to selected airline or hotel loyalty programs or you can book travel directly through the rewards program itself using a portal or “pay with points” feature. With co-branded cards, your rewards earned are tied to one specific program, such as American Airlines AAdvantage or World of Hyatt.

When it comes to choosing a travel credit card, think about how you plan to use the rewards from that particular card. If you’re a frequent flyer with one particular airline or almost always stay in the same hotel chain when traveling, it may be best to get a co-branded card for that program. If you want more options to redeem rewards with different programs, then choose a card that offers flexible, transferable points.

Choosing a Cash-Back Card

Cash-back credit cards are well-liked by many people for their simplicity in redeeming rewards. Typically redemption options include a statement credit, direct deposit to your bank account or a check in the mail. Some cards offer a flat cash-back rate on all purchases, which is ideal if you don’t want to keep track of which card gets the most cash back at certain stores or purchase categories.

Other cards offer a higher cash-back rate on specific purchases, such as at supermarkets or dining at restaurants, and then 1% on all other purchases. If you find yourself spending significantly more money on certain types of purchases, it may be best to go with a card that has category bonuses.

Choosing a Balance Transfer Card

If you have existing debt at a high interest rate, having a balance transfer credit card can come in handy. Transferring your balance to a new card with a low introductory promotional rate (many even offer 0% APR) can help you pay down your debt quicker because more of your payment goes toward paying down the balance instead of toward interest.

When choosing a balance transfer card, you’ll want to review the APR, timeframe for the promotional rate and any balance transfer fees. A balance transfer card can be an especially good deal if you can pay off the balance before the intro period is over because after that, you typically switch to a variable APR based on your creditworthiness.