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.

1. 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: 

• Pay off debt quicker 

• Consolidate debts into one payment

• Qualify even with a low credit score

Cons:

• Ongoing APR can be higher than average 

• 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.

2. Low-balance cards

Cardholders will need to prove they pay their bills on time and lead a financially responsible life.

Pros:

• Does not require a strong credit history; may not even require one

• Gateway to “real cards”

Cons: 

• Low starting balance

• 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.

3. 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:

• Rewards can be significant 

• Credit limits are often generous 

Cons:

• Generally require a strong credit history and high credit score

• Rewards can have complicated rules

• May have a high annual fee

• 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.

4. Retail cards

Retail cards, or store cards, can fall into two categories:

• Closed loop – which means the card can only be used by the associated retailer, like the Target RedCard™.

• 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:

• Ongoing discounts

Cons:

• Can have smaller credit limits

• May have steep interest rates

• 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.