How do I Choose a Credit Card that Fits my Lifestyle?
Q: I’m looking for a new credit card, and I’m confused by the many options. How can I find the credit card that fits my lifestyle?
A: The credit card that’s best for you depends on your life circumstances, financial habits and goals. Let’s take a quick look at four kinds of credit cards so you can better choose the one that best fits you.
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Low-interest cards
Low-interest, 0% APR (annual percentage rate), or balance-transfer cards, all offer very little or no interest charges for an introductory period, which generally lasts 18 months. After that, the card’s ongoing APR kicks in.
Pros:
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Pay off debt quicker
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Consolidate debts into one payment
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Qualify even with a low credit score
Cons:
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Ongoing APR can be higher than average
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The new credit line can trigger overspending
Great choice for: consumers looking for a way to consolidate their debt, pay it off quicker and lower their overall interest.
Not recommended for: consumers who are likely to overspend by having more available credit and are unlikely to pay off their debt before the introductory period ends.
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Low-balance cards
Cardholders will need to prove they pay their bills on time and lead a financially responsible life.
Pros:
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Does not require a strong credit history; may not even require one
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Gateway to “real cards”
Cons:
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Low starting balance
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High interest rates
Great choice for: beginner credit card holders who have slim or no credit histories.
Not recommended for: consumers with high debt and are looking for more credit from a card with easy eligibility requirements.
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Rewards cards
These credit cards offer the cardholder some kind of reward, such as gas points, cash back or travel points, for every dollar spent.
Pros:
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Rewards can be significant
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Credit limits are often generous
Cons:
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Generally require a strong credit history and high credit score
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Rewards can have complicated rules
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May have a high annual fee
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Interest rates can be high
Great choice for: big spenders with high credit scores who are able to pay their monthly credit card balance in full.
Not recommended for: cardholders who will find the rewards system too complicated.
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Retail cards
Retail cards, or store cards, can fall into two categories:
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Closed loop – which means the card can only be used by the associated retailer, like the Target RedCard™.
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Open loop – sponsored by a retailer and backed by a major credit card network.
These credit cards offer lots of kickback in the form of ongoing discounts, cash-back and special promotions.
Pros:
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Ongoing discounts
Cons:
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Can have smaller credit limits
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May have steep interest rates
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Often require high credit scores
Great choice for: Loyal customers of a specific brand who have excellent credit scores.
Not recommended for: the budget-averse shopper, as these cards can lead to racking up lots of debt.
Use this guide to help you choose the credit card that best fits your lifestyle.