How to choose a credit card

Choosing the right credit card can be a daunting task, given the myriad of options available in the market. Whether you're looking to earn rewards, build credit, or save on interest rates, selecting a credit card that aligns with your financial goals and lifestyle is essential. This guide walks you through the process.

Deciding what is important to you

Reward Program

Credit card rewards programs are a crucial factor for many consumers when selecting a new card, as they can offer significant value and benefits like points, miles, or cash back. Understanding the nuances of these programs, including the value of rewards, redemption partners, ways to redeem, transferability, and expiration policies, is essential for maximizing their benefits and aligning them with your spending habits. Some programs offer more flexibility and value by partnering with various airlines, hotels, and retailers, while others may have stricter limitations.

When recommending credit cards, Crunchly takes into account both your preferred rewards program(s) and the value and earning potential of those programs. This includes calculating potential rewards earned through everyday spending, considering sign-up bonuses, and factoring in the rewards rates offered by each card for different spending categories. By considering these factors, Crunchly aims to provide tailored recommendations that align with your preferences and maximize your rewards earnings.

Benefits and Perks

Credit card perks and benefits can significantly enhance the overall value proposition for cardholders. From exclusive air travel benefits like airline companion passes and airport lounge access to hotel perks such as free nights and status boosts, these extras can add substantial value. Other perks include rental car benefits, dining privileges, and protections like cell phone insurance and gym memberships.

At Crunchly, we consider these perks and benefits as additional features beyond rewards points, cash back, and credits. When recommending credit cards, we prioritize cards with perks and benefits preferred by users, taking into account their importance alongside other factors such as card issuer and rewards programs. By incorporating these considerations, we aim to help users make informed decisions that align with their preferences and maximize the value they receive from their credit cards.

Card Issuer

When it comes to credit cards, the issuer plays a crucial role in determining the card's terms, perks, and overall experience for the cardholder. Understanding who the issuer is and what they offer can significantly impact your financial decisions and credit card choices.

A credit card issuer is a financial institution or bank that issues credit cards to consumers, providing access to credit with predetermined limits. Factors such as rewards programs, interest rates, and customer service quality vary among issuers, influencing cardholders' experiences and financial well-being. When choosing an issuer, considerations such as existing relationships, physical branch availability, rewards programs, customer service quality, and security features are essential for making informed decisions.

Card Network

Credit card networks serve as the backbone of credit card transactions, facilitating communication between banks, payment processors, and merchants. They ensure smooth transactions by verifying card details, checking credit lines, and authorizing purchases. Understanding which network your card belongs to can impact your experience, affecting factors like acceptance, security measures, and available benefits and rewards.

Major credit card networks like Visa, Mastercard, Discover, and American Express offer extensive acceptance, but each has its unique features. American Express, for example, boasts high acceptance rates in the USA and offers robust security measures along with exclusive benefits like travel perks. Discover, known for its cash back rewards, prioritizes security and offers a $0 Fraud Liability Guarantee. Mastercard and Visa, with their global acceptance, focus on security through technologies like chip-and-pin and real-time fraud detection, while also providing various benefits and rewards depending on the issuing bank.

Deciding how you will use the card

Recurring Spending

Understanding your monthly spending habits is crucial for selecting the right credit card tailored to your financial needs. Crunchly considers various factors related to your monthly expenditure when making recommendations, as it directly influences the rewards, perks, and overall value you can derive from a credit card.

Crunchly factors in your expected spending to determine eligibility for introductory offers, rewards, credits, foreign transaction fees, and interest charges. By analyzing your spending across different categories like hotels, airfare, groceries, dining, and more, Crunchly provides personalized recommendations based on your anticipated spending patterns. Additionally, if you're close to reaching a spending threshold for a bonus, Crunchly can advise on accelerating your spending strategically to unlock the bonus, provided it aligns with your planned expenses.

Foreign Transaction Spending

Foreign transaction spending refers to purchases made outside of one's home country or in a foreign currency, encompassing a wide range of transactions from travel expenses to online shopping with international merchants. Understanding the nuances of foreign transaction spending is essential for optimizing credit card usage and minimizing unnecessary fees.

Foreign transaction fees, typically ranging from 1% to 3% of the transaction amount, can significantly increase the cost of purchases made abroad or with international merchants online. By being aware of these fees and their potential impact, credit card users can make informed decisions about when and how to use their cards, ensuring they maximize value and avoid unnecessary expenses.

How You Will Pay Off New Purchases

Knowing how you plan to pay off new purchases pay off new purchases can significantly impact your credit card usage and overall financial well-being. When using a credit card for new purchases, the interest rate, or APR (Annual Percentage Rate), plays a critical role in determining the overall cost of borrowing. If you anticipate carrying a balance on your card, it's crucial to consider the APR associated with new purchases. Opting for a card with a lower APR can lead to significant savings on interest charges and reduce the long-term cost of carrying a balance. When evaluating credit cards for carrying a purchases balance, several factors come into play. Firstly, assess the promotional period, aiming for cards offering a 0% APR promotional period on new purchases balances, allowing for interest-free payments for a set duration. Following this period, the regular purchases APR becomes relevant, influencing the ongoing cost of carrying a balance. Comparing the APR of the new card with your current card's APR is essential, as a lower APR on the new card can result in reduced interest payments. Additionally, ensuring the new credit card has an adequate credit limit to accommodate potential balances is crucial for effective balance management.

Crunchly evaluates and considers balance transfers based on the user's payoff method, which significantly impacts interest payments. Users can select their preferred payment approach, whether it involves paying the full amount each period to avoid interest charges, paying off most new charges while carrying a small balance to the next period, or making only minimum payments, resulting in carrying a significant portion of the new purchases balance from month to month. This selection guides Crunchly's recommendations, allowing users to align their credit card usage with their payment strategy to optimize interest payments and overall financial management.

Balance Transfer

A credit card balance transfer involves moving outstanding debt from one credit card to another, typically to obtain better terms such as a lower interest rate or more favorable repayment terms. This strategy is commonly employed by individuals seeking to reduce the overall cost of borrowing, especially when faced with high-interest debt on their current card. By transferring the balance to a card with a lower interest rate or a promotional 0% APR period, borrowers can potentially save money on interest charges and expedite their debt repayment process.

Several factors should be considered when contemplating a balance transfer. These include assessing balance transfer eligibility, understanding transfer fees, evaluating the promotional period offered, comparing balance transfer APRs with current card APRs, and ensuring the new card's credit limit can accommodate the transferred balance. Crunchly evaluates and considers balance transfers by calculating the expected value across all eligible cards, taking into account the transfer amount, credit card search settings, and payoff method. Users can adjust settings to personalize recommendations based on their repayment preferences and financial goals.

How Long You Plan to Keep the Card

Consider the duration you intend to keep a credit card, as it significantly affects its value. Cards often offer limited-time sign-up bonuses, rewards, and benefits. Cancelling too soon may mean missing out, while keeping a card too long could lead to paying more fees than gaining benefits. Most cardholders keep thier cards for a multiple years, since continuously re-applying for cards can negatively impact your credit score, as can closing a credit card account. Take a moment to reflect on this.

Assessing your Current Situation

Credit Score

Knowing your credit score beforehand is crucial to save time, hassle, and prevent potential credit score damage. Applying for cards usually triggers a hard inquiry, which can temporarily lower your score. By understanding your approval odds - i.e. what cards generally are good for your current credit score and financial situation - you can avoid unnecessary inquiries and focus on cards aligned with your credit profile, enhancing your chances of success. Approval decisions consider various factors beyond just your credit score, including income, debts, employment status, and payment history. Higher credit scores typically indicate lower risk and increase approval chances, while lower scores may lead to higher interest rates or denial.

Current Interest Rate (for comparison)

Knowing your current interest rate is important for comparing cards, since you will likely want to find one that offers a lower rate for purchases balances and/or balance transfers.

When evaluating credit cards, Crunchly considers your current interest rate to provide recommendations that align with your financial goals and preferences. By comparing the interest rates offered by different cards, Crunchly helps users identify cards that can potentially save them money on interest charges and reduce the overall cost of borrowing. Whether you're looking to transfer a balance, make new purchases, or carry a balance from month to month, understanding the interest rates associated with each card is essential for making informed decisions and optimizing your credit card usage.

Final Thoughts

By considering these factors and comparing multiple credit card options, you can choose a card that complements your financial goals and lifestyle while maximizing the benefits and rewards available to you. Remember, though, to carefully review the terms and conditions of each credit card, including the rewards program rules, grace period, billing cycle, and any limitations or restrictions. Understanding these details will help you make an informed decision and avoid unexpected surprises or fees.

Use credit responsibly and pay your balance in full each month to avoid unnecessary interest charges and debt accumulation.