Before you are tempted by promises of reward miles or cash back offers by credit card companies, you need the answers to questions which will save you time and help you make that determination.
What is your credit score? Most of the credit cards offering the best interest rates and rewards require an excellent or good FICO credit score to qualify for the card. 90% of lenders use FICO scores to determine your credit risk. Generally, an excellent FICO credit score is 750 or more, a good credit score is 700-749, a fair credit score is 650-699, a poor score is 600-649, and a bad credit score is below 600. However, lenders may vary the number ranges as much as fifty points. You are entitled to a free credit report once a year by the three major credit rating companies, Equifax, Experian, and TransUnion. Make sure all your information is correct by all three companies. If it is not, your score may be drastically affected. Although, most free credit scores offered online are Vantage scores (a newer scoring system), FICO scores are used by these three credit reporting companies in determining their respective scores.
What type of card are you seeking? There are different offers for personal or business cards. If you are a student or serving in the military, there are some specific credit card offerings for you. Don’t forget to inquire if you qualify for any of these cards and compare them to other offers.
Do you want to earn the most rewards or pay the least interest? If you pay off your credit card every month, the interest rate may not concern you as much as someone who keeps a balance. Remember you receive rewards on paid balances. High interest rates can negate the value of rewards if you have unpaid monthly balances. If a card offers a 0% interest rate, how long does that offer stand, and what is the annual interest rate after that period expires?
In addition to a low annual interest rate, do you want to obtain a card that has no annual fee or allows balance transfers? Do you need to build credit with a secured card or a prepaid card due to your current credit score? What type of rewards best suits your lifestyle? Would you use cash, point, airline, gas, or hotel rewards most? Carefully research the card offerings and if the terms change. Some cards offer rewards on a rotating basis. You may get extra miles on gas, groceries, restaurants, etc. that only last for a certain time frame.
How easy are the rewards to redeem? A simple cash back reward on all purchases may work better for you than airline mile rewards that face restrictions for redemption. Find out what the reward redemption entails for the card you are considering.
Is there a limit on the amount of a reward during a certain time frame?
Some cards, for example, have a cash back or reward limit per year. If you plan on a large purchase, cards are available that have bonus points for spending a set amount in a specified time frame. In that case, this could be a substantial benefit.
Know what your credit score; determine what types of rewards, annual fees and interest rates best benefit your lifestyle, and then research all the changing credit card offers down to the fine print. Happy hunting!