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This post comes from Logan Abbott, editor of the credit card section of MyRatePlan.com.
A Money Talks News reader recently wrote with this question:
I’ve had a credit card for a couple of years now, and I’m at the point where my credit score and history has improved enough where I want to start shopping for a better credit card since the one I currently have does not offer any rewards.
My bank recommended the card I have two years ago, but I know there are better credit cards out there. What are some factors I should take into account when looking for a new credit card?
Shopping for a new credit card can be a daunting process if you don’t know what to look for. There are endless offers in the mail, not to mention the barrage of advertising online, on TV, and everywhere else you look.
So start by ignoring the ads. The way to select a credit card is by careful comparison, not responding to something in the mail or on TV.
Before you start shopping, ask yourself these four questions:
1. Will I carry a balance?
Knowing this is probably the most important place to start. If you’ll carry a balance, you certainly don’t want a card with a high interest rate – you want one with an introductory 0 percent rate, and the lowest possible rate after it expires.
You don’t care about rewards, because reward cards typically have higher rates, and no card offers rewards valuable enough to offset the extra interest.
The Citi Simplicity Card, for example, offers a 0 percent intro annual percentage rate (APR) on both purchases and balance transfers for 18 months, so you have a good year and a half to pay your balance down before being charged interest.
2. What’s my credit score?
Knowing your credit score will help narrow your options. Learn more about getting yours here.
The reason to know your score before you start? If you apply for too many credit cards in a short period of time, you risk hurting your credit score. And there’s no reason to waste time applying for cards that won’t accept you anyway.
If you have excellent credit, you’ll be approved for lots of cards, so look for one that offers low interest if you carry a balance and great rewards if you don’t.
If you have average credit, your options are a bit more limited, and if you have poor or no credit, then you’ll be looking for plastic targeted at that niche, like the Capital One Secured MasterCard.
3. How will I be using it?
Understanding how you’ll be using your card will help you decide which is the best choice, especially with rewards cards.
Many cards offer more cash back or rewards points for certain spending categories. For example, if you’ll be using your card primarily for gas and groceries, you’ll want a card like the Blue Cash Preferred from American Express. It offers 6 percent cash back at U.S. supermarkets and 3 percent at U.S. gas stations.
You also want a rewards program tied to the type of rewards you want. If you want free travel, for example, you want a card like Capital One Venture Rewards, because reward miles can be redeemed for flights and you get 2 for every dollar spent.
4. Am I okay with paying an annual fee?
When you’re comparing credit cards, you definitely want to make sure you take annual fees into account.
If you’re using a good rewards card, and use it a lot, there’s a chance the rewards will outweigh the annual fee. But if you don’t use the card or rewards very often, the annual fee is a waste of money.
There are a number of great credit cards available offering rewards without annual fees, like the Capital One VentureOne Rewards Card and the Citi ThankYou Card.
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Note: While we attempt to be completely objective when reporting on credit cards, this site may be compensated by issuers when a reader applies for a credit card through the links within credit card stories or on our credit card search page.