Finding a credit card can be just as personal a process as shopping for any other consumer good, whether it be clothing, a car, a home, or anything else: It must suit your needs but also fit in your budget. When it comes to credit cards, cost is most often determined by interest rates.
Like many consumer products, whether the price is “good” is subjective. What makes a credit card’s interest rate good or bad for you depends on several personal factors.
Decide What Kind of Card You Need
One of the first things to consider when credit card shopping is how you’ll use that card. If you plan to pay every statement balance in full, the annual percentage rate doesn’t matter much, because you won’t be accruing interest on your purchases anyways. You still need to know what your APR is — you should be familiar with the terms of any credit product you have — because even though you never intend to carry a balance on your card, you need to know what it would cost if you did.
If you plan to use the card as a financing tool, prioritize finding a card with a very low interest rate. It’s pretty simple: The longer you carry a balance on that card, the more the purchases will cost you, and that directly relates to your APR. (Here are a few of the best low-interest credit cards to help you shop.)
Your Credit Score Is the Key to Your Best Rate
When you shop around for a credit card, you need to have a general idea of your credit standing, because that will affect the interest rates for which you qualify. Once you know where you stand — you can get two of your credit scores for free on Credit.com — you can see what sort of cards and interest rates that gives you access to.
If you have excellent credit, you may be able to qualify for cards with a 0% promotional financing period. Single-digit ongoing APRs are also available if you have great credit. That doesn’t mean you’ll only have access to double-digit APRs if your credit isn’t great, but you may have to pay an annual fee to offset the lower rate.
The Internet is a great resource for finding cards, based on your credit standing, and the best way to find your most affordable option is to do some legwork: Get your credit score, and use that information to see what sort of interest rates are offered to people with similar scores. How do you tell if a card’s APR is good? It’s good if you think you can qualify for the card, and the rate is lower than ones offered by other cards you might be able to get. Issuers’ websites often say what credit tier the card is designed for, but you can also use online credit card comparison tools like this one to explore many options in one place.
The research is important, because there is no “best interest rate” out there. Every consumer has different options, based on his or her individual credit history. With that history in mind, it’s important you apply only for credit you can reasonably expect to be approved for, because applying for credit results in a small, temporary drop in your credit score. The less often you do it, the better.
More on Credit Cards:
- The Credit.com Credit Card Learning Center
- How to Lower Your Credit Card Interest Rates
- 6 Smart Credit Card Strategies