How to choose the right credit card for you

Credit cards are like snowflakes; you’ll be hard-pressed to find two that are the exact same. With varying features and terms, there’s no single credit card that works best for everyone. 

Learning the different types of rewards and benefits that credit cards offer and understanding your needs and preferences can help you determine the best credit card for you. Here are some steps you can take to choose the right credit card and how your credit score comes into play when you apply.

1. Check your credit score

There are credit cards available to people across the credit spectrum, but the cards that offer the best rewards and perks are typically reserved for those with good or excellent credit. According to FICO, a good credit score is 670 or above.

Before you research credit cards, check your credit score to get an idea of your credit health. It’ll help you to determine whether you need to make some improvements before you apply.

Aren’t sure what your credit score is? Here’s how to find it 

2. Decide which type of credit card you want

There are several different credit card types, and certain categories may be a better fit for you than others. For instance, would you benefit more from cash back or travel points?

If you have a large expense coming up, or if you need help paying down high-interest debt, you may consider a 0% APR credit card that temporarily waives interest on purchases or balance transfers. And if you’re just starting to establish your credit history, a student credit card or a secured credit card may be the right fit. 

Once you understand your needs and goals, you’ll have a better idea of which credit card features make the most sense.

3. Look at your spending habits

If you’re interested in earning rewards, you’ll want to find a rewards card with a program that aligns with your spending. 

For example, if you spend a lot on gas and groceries, you may consider cards that offer cash back, points or miles on purchases in those categories. The Blue Cash Preferred® Card from American Express (terms apply, rates & fees) earns 6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations, 3% cash back on transit and 1% cash back on other purchases. Cash back is received in the form of Rewards Dollars that can be redeemed as a statement credit or for eligible items at Amazon.com checkout. The card has a $0 intro annual fee for the first year, then $95.

Other popular bonus reward categories might include dining, travel, streaming services, transit, drugstores, home improvement stores, entertainment and more.

Alternatively, if you don’t spend a lot in any budget category — or you prefer a simpler rewards program — you may consider a card that offers a high, flat rewards rate on every purchase you make. The Wells Fargo Active Cash® Card is a no-annual-fee credit card that earns an unlimited 2% cash rewards on purchases.

You’ll also want to consider how a credit card might change your spending habits. If you’ve had trouble with overspending in the past, or if you think a credit card might tempt you to spend beyond your means, a credit card might not be for you.

4. Shop around

To find the credit card that will give you the most value, it’s important to shop around and compare several options. If you’re looking for a rewards credit card, for instance, you’ll want to examine how the card earns rewards, if it earns higher rewards on certain types of spending (sometimes called bonus categories), welcome offers and rewards redemption flexibility. You’ll also want to consider other card features, such as 0% APR promotions, travel perks, insurance protections and shopping or dining benefits.

Finally, look at the annual fees. While an annual fee isn’t necessarily a bad thing, you’ll want to make sure you can get enough value from the card to offset the price tag.

What you need to qualify for a credit card

Your credit score is a crucial factor in determining your approval odds, but it’s not the only thing credit card issuers consider. Here’s what to know before you submit an application:

• Credit score: You can be approved for a credit card even if you have poor credit — or no credit history at all (such as secured credit cards). But many of the best rewards credit cards require higher credit scores, so you’ll want to learn about credit requirements during your comparison process.
  
• Income: There’s no minimum income requirement to get a credit card, but card issuers are required to assess your ability to repay any debt you incur. As such, your best bet is to have a full-time income. If you’re age 21 and over, you may also be able to include spousal income, retirement income, trust fund distributions and other income sources to which you have reasonable access.
  
• Other debt: Credit card issuers will use your income and other debt payments to calculate your debt-to-income ratio (DTI). There’s no hard-and-fast rule for what your DTI should be, but the higher it is, the harder it will be for you to take on another monthly payment. Chase states that lenders typically prefer a DTI lower than 36%.
  
• Available credit: If you already have credit cards with a lot of available credit, a card issuer may balk at giving you more due to the potential that you could rack up a lot of debt you can’t afford. If your application is declined, ask the bank if reallocating some available credit from one of your existing cards would result in an approval.
  
• Card issuer-specific rules: Credit card issuers may also have their own rules during the application process. For example, Chase generally won’t approve a credit card application if you’ve opened five or more credit cards in the past 24 months aka the “5/24 rule”. And while American Express will approve an application for a credit card you’ve had in the past and since closed, you likely won’t qualify for the welcome bonus. 

Understanding your credit score

Your credit score is an indicator of how well you’ve managed debt in the past. A high credit score indicates that you’ve made payments on time, kept your credit card balances low relative to your credit limits and avoided applying for credit cards too frequently. 

In contrast, a low credit score may be due to missed payments, a high credit utilization ratio, frequent applications and other missteps. 

Checking your credit score before you apply for credit is critical, but it’s also important to monitor your credit regularly to better understand how your actions impact your credit score. Using a credit monitoring service can also help you spot potential issues before they damage your score. 

How does it impact your chance of approval?

Again, your credit score is just one of many factors that credit card issuers evaluate to determine your eligibility. But if your credit score doesn’t meet the card issuer’s minimum requirement, the other factors likely won’t make much of a difference. 

That’s why it’s so important to check your credit before you apply. In some cases, card issuers may even offer pre-approval tools that can give you an idea — albeit not a guarantee — of whether you have a good chance of getting approved.

If your credit score doesn’t meet a credit card’s eligibility criteria, work to improve your credit before you apply. 

Tips for managing your credit card

It’s important to practice good credit habits to continue building and maintaining a good credit history. Here are some best practices that can help you avoid costly interest charges and potential credit score damage:

• Pay on time and in full every month: Your payment history is the most influential factor in your FICO score, so paying your monthly bill on time is a top priority. If you miss a due date, get caught up quickly — late payments don’t get reported to the credit bureaus until between 30 and 60 days past due. Also, consider paying your balance in full every month to avoid interest.
  
• Keep your balance low: Your credit utilization ratio — the percentage of your credit limit you’re using — is another important factor in your credit score. While there’s no definitive threshold for what your utilization ratio should be (the rule of thumb is below 30%), try to keep it as low as possible.
  
• Avoid overspending: Avoid using your credit card to spend beyond your means. If you’re not careful, you can rack up a large balance quickly.
  
• Don’t take cash advances: In a financial emergency, taking a cash advance from your credit card may be preferable to, say, a payday loan. But in general, it’s best to avoid cash advances, which come with an upfront fee and (usually) a higher interest rate. Cash advances also don’t enjoy the same grace period as purchases.

Should you have multiple credit cards?

Using multiple credit cards can allow you to take advantage of the different rewards and benefits each card offers. 

For example, if you want a card that offers accelerated rewards on your top spending categories, but the non-bonus rewards rate is subpar, you could maximize your reward-earning potential by pairing it with a card that offers a respectable rewards rate on everything.

This may cause you to ask, “How many credit cards should I have?” Using multiple credit cards is only a good idea if you have the time and mental bandwidth to monitor them. Budgeting apps that import all of your transactions into one place can help. But if you’re missing out on card benefits because you can’t keep track of them, it might be better to have fewer cards.

Frequently asked questions (FAQs)

^{For rates and fees for the Blue Cash Preferred® Card from American Express please visit this page.}