Whether you are starting out in life (and credit), starting over, or enjoying excellent credit, it can be difficult to know which credit card is right for you. Here are some tips:
1. Know thyself
Are you able to only use a credit card like a debit card? This means you only use the credit card when you have cash in the bank to cover the purchase and you will pay the balance before any interest is charged?
If not, do not temp yourself with a credit card. Either keep it at home (our grandmothers preferred to freeze it in a block of ice) or make your statements available to someone who will hold you accountable.
2. Know your credit score
I learned tonight this does not work in the Netherlands, where creditors only report negative information and credit cards are issued based on your net income.
But, for those of us in countries that base credit card offers on your credit score, know your score. In the USA you are entitled to one free credit report annually from each of the three major reporting agencies- Trans Union, Experian, and Equifax.
Check your credit report annually. Make sure the information is correct, dispute anything that is not, and make sure there is nothing fraudulent going on.
3. Choose the “right” credit card for you
In the USA you can go to creditcards.com and see all of the credit card offers available. You can even narrow down cards based on your credit score. We found a similar website in the Netherlands, so chances are you can find one where you are.
Since credit rejections count against you, you do not want to blindly apply for credit cards hoping someone approves you. Do your homework and apply strategically.
Once you have narrowed down the cards based on your credit score (or income), check out the terms. If there is an annual fee make sure it gives you something in exchange that exceeds the annual fee.
If you are rebuilding credit, you may not qualify for a major credit card. Check with your primary bank to see if they can approve you for a bank credit card. Or you may have to choose a secured credit card, which basically works like a debit card but is reported to the credit bureaus and can help you re-establish credit. Check around for the best terms and rates.
You may also be able to have someone with excellent credit add you as an authorized user on their credit card. This allows you to piggyback off their good credit (meaning their good score will help raise your score). Some creditors are catching on to this practice, mostly because people started to sell their scores for profit, and may reduce the number of points doing this will help you.