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Tips When Deciding Between Credit Card Offers

Tips When Deciding Between Credit Card Offers

April 27, 2020

Different credit cards can offer different services and interest rates, and many include special offers to tempt you into applying. But if you want to keep your credit score healthy, you can't simply apply to every credit card offer you receive. You'll have to be discerning and only occasionally apply for a credit card to avoid harming your credit score.

So don't be dazzled by each credit card's benefits; instead compare them carefully to figure out which ones will add the most value to your finances. Here are some tips when deciding which offers are most relevant and productive for your situation.

1. Analyze Your Spending

Looking through your bank and credit card statements to see your spending patterns may not be your idea of a good time, but it can be a useful exercise. Many people use this activity to help form their next month's budget, but you can also use it to calculate how much use you'll get out of a specific credit card.

For example, if you have an offer for a travel credit card that sounds great, looking through your spending patterns can give you a realistic idea of how great it will be for your budget. If you notice that you usually only travel a few times per year, you can then calculate how much mileage you're likely to actually get out of this credit card.

If you're more of a visual learner, look for a budget application (your bank may offer one) that can analyze your spending habits and make a graph for you. This can help you visually see just how much of your income you spend on different things. So for example, if you notice a high proportion of income goes to groceries, you might prioritize a card with grocery cash back.

2. Don't Forget to Factor in Fees

Some credit cards may come with a low introductory interest rate for both new purchases and balance transfers. If you currently have a large balance on a different credit card that you need to pay down, you may be able to save on interest costs by choosing a card with a lower interest rate and transferring your current balance to it.

But remember, with a balance transfer, the interest isn't the only thing you have to pay. You'll typically also have to pay a balance transfer fee, which is calculated as a percentage of the amount transferred.

If the amount you're thinking to transfer could be paid off in a couple of months, the amount of interest it will accrue in that time may or may not be more than the amount you'd pay as fees. If you're unsure, use a balance transfer calculator to see if it's worth the trouble.

3. Compare Convenience Factors

Once your introductory benefits, such as low interest rates, have expired, how useful will the card be to you? Many credit card companies now offer features to improve convenience and ease of use, on top of ongoing cash back you may receive. Some factors to look for include:

  • Contactless payment technology
  • Widely available (and ideally free) ATMs
  • Zero fraud liability
  • Great customer service
  • Online account management

In addition, you may want to consider whether you'll be able to regularly use the card for everyday purchases. For instance, businesses that accept Visa cards are far more numerous than those that accept American Express cards. So depending on where you normally shop, a Visa card may be more convenient.

As you can see, you have a lot more to consider than just the tempting numbers attached to the credit card offer. You'll need to consider how much of your spending these numbers will actually affect, whether the benefits will be offset by fees, and more.

For more information on smart credit card decisions and usage, contact Presidio Wealth Management today. We're here to help you with your financial decisions, education, and goals.