Five key credit card need-to-knows

1. Your credit score and credit history

Understanding your credit score and credit history is pivotal in the lending process. Lenders utilize this information, obtained from credit bureaus, to assess your creditworthiness and determine whether to extend credit to you. A commonly used metric is the FICO score, categorized as follows:

1. Excellent: 800 to 850
2. Very good: 740 to 799
3. Good: 670 to 739
4. Fair: 580 to 669
5. Poor: 300 to 579

2. Welcome offers

A welcome offer, commonly known as a welcome bonus, is a promotional incentive typically extended to new card members, commonly found in rewards credit cards. These offers exhibit variations, often presenting new cardholders with a substantial amount of rewards upon meeting a specified spending threshold within the initial few months of card membership.

As an illustration, the Chase Sapphire Preferred® Card boasts a sign-up bonus: Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening.

It's essential to recognize that credit card offers can deliver significant value and warrant careful consideration when comparing multiple credit cards. In instances where two credit cards offer similar benefits, opting for the one with a higher welcome bonus can often be the more advantageous choice. Evaluate these offerings meticulously to make informed decisions aligned with your financial objectives.

3. Types of rewards

Credit card rewards are commonly earned in the form of points, miles, or cash back, providing a range of options tailored to individual preferences. Points and miles are particularly advantageous for those inclined towards travel, allowing redemption for flights or hotel stays. On the other hand, cashback rewards offer a practical alternative for individuals not seeking travel-related redemptions, providing opportunities to save on everyday expenses.

Pro Tip: Beyond standard rewards, credit cards often feature additional benefits such as discounts, extra points for rideshare services like Uber or Lyft, fee credits for TSA PreCheck or Global Entry applications, and exclusive access to events. Exploring these supplementary perks can enhance the overall value and utility of your credit card choice.

4. Rewards categories

In addition to the diverse range of rewards available, credit card users can accrue reward points through various approaches:

• Flat-rate rewards: Earn a consistent rewards rate on every purchase, offering simplicity and reducing the need for multiple cards in your wallet.
• Bonus categories: Receive heightened rewards on specific types of purchases, optimizing your benefits for targeted spending.
• Rotating categories: Enjoy increased rewards on specific purchases during designated times of the year, aligning with seasonal spending patterns.

Pro Tip: Be mindful that certain cards offering higher cash back rates for grocery stores may exclude stores like Walmart and Target from the grocery store category.

For those with varying expenses, a credit card featuring rotating bonus categories might prove advantageous. These categories often correspond to common expenses, presenting opportunities to earn substantial rewards on everyday purchases throughout the year.

Additionally, exploring reward card programs, such as Chase Ultimate Rewards or American Express Membership Rewards, allows you to align your credit card choice with your preferred rewards and benefits. Understanding these nuances empowers you to make informed decisions that maximize the value of your credit card usage.

5. Annual and Other Fees

When selecting a credit card, consider the impact of annual fees, often associated with enhanced benefits. Assess the annual cost against the card's features to ensure alignment with your financial goals. Additionally, be vigilant about the card's interest rate, especially if you anticipate carrying a balance. Some cards offer a 0% introductory APR on purchases and/or balance transfers, providing a grace period to avoid interest charges.

Furthermore, take note of potential fees, such as late payment fees or cash advance fees, and factor them into your decision-making. If you're planning international travel, opting for a card with no foreign transaction fees can save you money on each purchase made abroad. Understanding these elements ensures that your chosen credit card not only meets your financial needs but also optimizes your overall spending experience.