Choosing the Right Credit Card for Your Lifestyle
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In the world of personal finance, many people preach abstinence when it comes to credit cards. If you have had spending problems in the past or are trying to get out of debt, it makes sense to avoid credit cards. However, for cardholders who can use credit cards responsibly, taking advantage of credit card offers can be a helpful tool in their money management.
When my wife and I married, we opened a credit card to pay for our travel expenses to Costa Rica. This was a helpful way to spread the cost out over monthly payments with an introductory APR offer. Even so, we didn’t do a lot of research and wound up leaving a lot of money on the table because we didn’t get any cashback or travel points for our flights or hotels. Had we done some research and considered our lifestyle and goals a bit more, we could have reaped even more benefits besides being able to take the trip.
How do you find the best credit card for you and your lifestyle? Since much of this comes down to personal preference and the life you’re trying to lead, reflection and research are two key components of finding the right card. Read on to learn how to define your financial goals and lifestyle, explore different card options, and ultimately pick the right credit card.
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Defining your financial goals and lifestyle
Before you begin to look at what credit cards are out there, assessing your lifestyle and overall financial goals is a good idea. Here are a few tactics to consider as you analyze what features may be important to you in a credit card.
Naming your financial priorities
Different people have different priorities when it comes to their finances. Some people love fitness and health and pay a premium for those spending categories. Others hope to take a family vacation every summer and wouldn’t mind getting a little extra financial help.
By defining what you care about spending money on and what you don’t feel the need to pursue, you can quickly start to weed out credit card offers that don’t align with your financial priorities. Especially if you have excellent credit, you’ll be awash in credit card offers once you start looking for cards you qualify for. Being able to separate the offers that appeal to you from the ones that don’t can help you make your decision more quickly.
Auditing your spending habits
Once you’ve imagined the sorts of things you’d like to use your credit card to achieve, it’s important to look at where you spend your money regularly. An easy way to do that is to open up your past few bank statements — or, if you use a budgeting app such as YNAB, you can look at reports there.
By looking at where you spend your money (and how much you spend), you can start to get a feel for the sorts of rewards or cashback categories that would be most appealing to you. For example, the Discover it credit card has rotating bonus categories for cashback. Sometimes, those categories cover things like gas station purchases, which, if you live in a big city and take public transit, you may not care about as much as other perks like bonuses when dining out.
Auditing your spending habits can also help you estimate how much value a certain card offers you. For example, the Chase Sapphire Preferred® Card credit card offers a free year of Doordash delivery service, allowing you to save on various Doordash fees when placing an order with your Chase credit card. If you order out a lot, this could be a great perk for you; however, if you haven’t audited your spending habits, you won’t have a full picture of how much value these sorts of deals offer you.
Determining your credit goals and needs
If you still have debt, you may want to be more wary about opening a credit card. This is because new accounts and the number of purchases you make on a card can affect your credit score. On the other hand, if you have excellent credit (or even good credit), you may be less worried about what opening a new credit card could do to your score.
Checking your FICO score is a good idea before opening a new credit card. This is because different premium credit cards have credit score requirements even to be eligible for the card. Doing your research ahead of time can save you the trouble of getting your credit score dinged with a hard check, only to miss out on the opportunity to open a specific card because of a low score.
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Types of credit cards
There are all kinds of credit cards out there, and not every card will appeal—or even apply—to every kind of consumer. Here are some of the most common types of credit cards you may want to consider as you explore different options.
Rewards credit cards
The rewards credit card is one of the most popular types of credit cards. As the name suggests, these sorts of cards offer rewards based on the number of points you accrue on specific purchases.
Some cards, like the Chase Sapphire Preferred® Card, even come with bonus rewards points when you sign up, combined with a robust rewards program and ecosystem for using your points on everything from travel to Apple products and statement credits.
Other reward cards are cash-back credit cards, which offer cash back on purchases you make. When it comes to top cashback cards, the Discover IT card has some of the best cash-back rewards on the market. In addition to a double cashback offer on cashback earned in your first year of card usage, Discover also boasts 5x bonuses for rotating quarterly categories. This helps to rack up your cashback on everyday purchases.
Beyond rewards cards, cashback cards, and points-based cards, frequent travelers may also be interested in travel rewards cards. Travel rewards credit cards offer bonuses when used to purchase airfare and hotels and other travel rewards. If you fly a lot for vacation or work, it may be worth looking into travel rewards cards. Some cards are linked to specific airlines and their loyalty programs, while others are broader in their use cases.
Balance transfer cards
If you’re in the process of paying off debt, sometimes it can be helpful to look into balance transfer credit cards. These cards allow you to transfer the balance from one credit card to another, often at a much lower interest rate.
In some cases, these promotional APRs (annual percentage rates) are much lower than the APR credit cards generally offer, meaning you can save hundreds or thousands of dollars in interest with a balance transfer card. Remember that some of these cards require a balance transfer fee, so that should be calculated into your math when determining whether or not a balance transfer card is right for you.
Low interest rate cards
If you know you’ll carry a balance on your card at any time, finding a low interest rate card may be a priority. This is because interest rates can quickly (and unnecessarily!) eat up a portion of your budget if you carry a balance on your credit card and rack up interest charges. If you need to carry a balance for any reason, it’s sometimes best to prioritize your credit card choice based on interest rate instead of other perks.
Student credit cards
Student credit cards can be a great idea for college students with limited credit history who are looking to build a credit score and learn to use credit responsibly. Student credit cards generally have lower credit limits, making them easier to manage and pay off responsibly. It’s like a credit card with “training wheels,” with many perks offered when it is used on academic or educational purchases.
Secured credit cards
If you have limited or bad credit, a secured credit card may be one of the only available options. These cards usually involve a security deposit that helps determine the credit limit. They are also much easier to get approved for if your credit report shows you have limited information or a low credit score. A secured credit card can be a valuable tool if you’re trying to rebuild your credit score.
Business credit cards
A business credit card can be a major win-win if you’re starting your own business and need capital to fund some of your business activities. In addition to offering you a hefty credit limit, many business credit cards offer reporting that makes it easier to track your spending. They also often come with rewards categories tailored to common business expenses, allowing you to save money on certain purchases before you file your taxes.
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Choosing the right credit card for you
Now that you’ve researched and mapped out each card's pros and cons, it’s time to decide. When choosing the right credit card for you, you’ll likely fall into one of two camps: a card that complements your spending habits or empowers you to earn rewards and pursue goals or other perks. There are benefits to both of these tacts, so it ultimately is best to pick the philosophy that best gels with your needs.
Picking based on spending habits
Sometimes, the easiest way to pick a credit card is to find one that already complements your spending habits. Especially if the card you’re looking at comes with an annual fee, ensuring that it’s something you will use for everyday purchases can help you get the most value out of your credit card. While picking a credit card based on your general spending habits may not reap the most “exciting” benefits, this strategy is a great way to get the most out of your card.
Picking based on rewards or perks
If gift cards or statement credits are more up your alley, you may want to pick a card based on its rewards. Perhaps you’re looking for a travel card to subsidize the family vacation you take every year. Or maybe you’re interested in cashing in for gift cards to use as stocking stuffers at Christmas. Suppose you know you can reliably go after certain rewards while meeting the criteria necessary to reap these benefits. In that case, being a bit aspirational with your credit card choice may make sense.
Other factors to keep in mind
Of course, just because a credit card looks good on paper doesn’t necessarily mean it fits you. Some people like to think of credit cards as an extra safety cushion; however, if you already have an emergency fund in a savings account, that’s really not going to factor into your decision. Here are a few things to keep in mind as you weigh the pros and cons of different credit cards available to you:
Credit card company reputation
There are a lot of credit card companies out there, especially with the dawn of Internet banking. Researching the credit card company issuing your credit card is a good idea since a company with poor customer service can quickly become a major drawback if you plan on using your card for important purchases and something goes wrong.
Introductory offers or promotional APRs
While variable APR can be a red flag after a card is opened, in promotional or intro offers, a lower variable APR can be great, as it allows you to save money by reducing any interest charges you may incur. While you probably don’t want only to pick a credit card based on its sign-up bonuses in the first year, these perks can easily tip the scales in one card’s favor.
Keep in mind that promotional offers generally have minimum requirements that need to be met to qualify for them. Make sure that you do some research to ensure you can meet the promo requirements before opening a card. For example, suppose you need to make $1,500 of qualifying purchases in the first three months after opening your credit card. In that case, having a clear plan for achieving that goal is a good idea without feeling pressured to overspend in certain budget areas.
Foreign transaction fees
Some credit cards have foreign transaction fees, meaning you will incur a small charge on every purchase you make in a foreign country. If you only plan on using your credit card domestically, this isn’t much of an issue. However, the last thing you want is to open a credit card you plan on using during your travels or vacations only to find that there are foreign transaction fees for your card use.
Security
Security features are common with almost all credit cards, but not all have the same security. Some credit cards let you deactivate with a single tap in a mobile app, while others come with fraud monitoring or zero liability protection for unauthorized transactions.
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The bottom line
When it comes to the different types of credit cards, it’s easy to get overwhelmed. Especially when you know that opening a new credit card and having a hard check can affect your credit score, it can feel like a lot of pressure to pick the right credit card. Thankfully, a wide range of credit cards are available to you, meaning that it’s easy to find a card that fits your needs and lifestyle.
While many consider the perks of opening a new credit card, different features and bonuses will appeal to different consumers. At the same time, you may not even qualify for some of the best perks based on your existing spending habits. For this reason, it’s a good idea to perform a financial audit on your recent spending before diving into the deep end with any specific credit card.
The good news is that whether you’re looking to get cashback on everyday expenses to battle inflation or are hoping to use travel points for a major trip to a foreign country, there are great card options to get you there. By leveraging the tips and advice above, you’ll be well on your way to choosing the right credit card for your lifestyle — and using it responsibly.
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Writer
Brent Ervin-Eickhoff is a Chicago-based writer, stage director, and filmmaker with a background in digital marketing and content creation. In addition to Joy Wallet, Brent has written for Complex, Volkswagen, HowlRound, Picture this Post, and Third Coast Review, among others. He currently serves as the Associate Director of Marketing for Content Creation at Court Theatre at the University of Chicago. Brent graduated from Ball State University with Academic Honors in Writing.
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