I often get emails from readers asking me what the “best” credit card offer is. I write back and say there isn’t one, which I’m sure doesn’t win me any friends, but it’s the truth. There is no best credit card for everyone, but I’ll certainly say that the best offer for you probably wasn’t that Citibank offer you got in the mail last week.
Yet, time and time again, people sign up for whatever credit card happens to be most available to them, even though they’re often just handing wads of cash to the credit card company for the convenience. I think a credit card can be a valuable purchasing tool if used correctly and in a healthy fashion, but you’re simply losing out if you don’t select a good card for primary use.
So how do you find a good one? First of all, do a little self-evaluation…
Will you likely carry a balance on the card?
If you will be carrying a balance on the card regularly (in other words, you won’t be paying the full balance on the card each month), then the interest rate trumps every other factor about the card. Here’s what to look for in a credit card offer:
Introductory rate How much is the rate at first? Hopefully, this will be 0% or something very close to it. An introductory rate above 5% is not impressive.
Length of introductory rate How long does that rate last? The longer, the better.
Billing and grace period Two-cycle billing is bad; avoid it if you can. Also, the longer the grace period, the better.
Balance transfer rate and timeline Many cards give you the opportunity to transfer a high balance on another card to this card at that low introductory rate. However, read the fine print – the interest rate on the transfer may be different, as may the period, as compared to the introductory offer.
Long-term rate The long-term rate is less important than the introductory rates. Especially notice the adjusted rate if you’re late with a payment.
On many offers, the amount is based on the prime lending rate, which you can easily find by Googling for “prime rate” – as of this writing, the prime rate is 8.25%. So, if an offer mentions prime plus 12.99%, your real rate is actually 21.24% – ouch.
How will you use the card?
If you do pay your balance each month, then the bonus offers become much more relevant for you. Here’s some advice on how to find the perfect credit card offer in your situation.
Carefully evaluate your spending Look through all of your expenditures in the last three months or so, and group them not only by type but also by where you made the purchase. The largest groupings you have are the areas you should look for bonuses on. For example, my biggest expenditure over the last three months is our automobile – for gas, oil, and such things.
Check directly with major credit card companies Don’t Google for offers – almost any term combination you type in will result in a bunch of spam for substandard offers. Instead, go directly to the major banks that offer cards – Citibank, Chase, CapitalOne, and Bank of America, for starters – as well as directly to the major credit companies – American Express, Visa, MasterCard, and Discover – to find offers.
Focus on offers that match your spending Since you’re not going to carry a balance, your primary focus should be on cards that offer significant rewards. Look for ones that align well with your spending and also with your lifestyle. For example, I’m a heavy commuter and I put a lot of miles on my vehicle, as does my wife, so for us, the Citi Driver’s Edge Platinum Select is a very good choice. On the other hand, perhaps you are very very diverse in your purchases, so a direct cash back credit card like the Citi Dividend card might be appropriate.
The key is to look at a multitude of offers and really try to balance what they offer with what you actually spend, not with your perception of what you spend. If you do this – and keep the balance paid off – you’ll end up money ahead for having used the card.
Isn’t recommending a credit card bad advice?
Credit cards are only what you make out of them. If you make bad decisions, credit cards can certainly amplify the mistakes, but if you make good choices (like keeping the balance paid off), they can be incredibly useful tools that make your shopping much easier and can put money back in your pocket.