Wherever you are in your financial journey, at the very beginning trying to pay off debt or closer to financial freedom trying to maximize the rewards on your card, it is important that you choose said card carefully. Many sites today help you compare the cards and their different features, like Totally Money. Generally, there are several cards that will adapt to your needs.
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0% balance transfer credit cards
For a limited period, those cards offer a 0% balance transfer. They are great if you are trying to pay off a high balance on many card, as a way to consolidate your debt for a one time fee. Usually, those cards will charge you 3 or 4% of the balance you wish to transfer, and then you have a 12 to 18 months period to pay off the balance. Be careful, once the deal expires, they usually revert to a high interest rate, or APR. During the 0% period, you should make a special effort to pay off as much as you can on the principle, and if you still have a balance at the end of the period, you can apply for another balance transfer. Make a reminder on your calendar of the expiry date of the 0% deal to pay off the balance and not be charged interest.
Low interest credit cards
If you have a good credit score, and usually pay off your balance in full every month, but sometimes don’t, you can look into low interest credit cards. The interest on those cards is in the 6-9% range, so you can use them to carry a small balance during a couple of months when your cash flow is tight without incurring too much of a penalty. It is always better to pay the balance in full, but life happens and having access to low interest credit can be easier than applying for a loan, and cheaper than using overdraft on your account.
Store credit cards
If you regularly shop at a supermarket or a special store that happens to offer a credit card, you should check out the perks they offer. It can be a furniture store offering 0% interest on your purchases for a year, or rewards points for regular shoppers. Again, make sure you can pay the balance each month or the rewards will not be worth it compared to the interest paid on the balance.
Rewards credit cards
Rewards credit cards are generally offered by airlines or hotel chains to their frequent customers. Like a store card, a rewards credit card allows you to earn miles or points with each purchase (with the card issuer or not), and redeem them for free flights or hotel nights. Those are great for people with good credit who repay their balance in full each month. Generally the sign up offer is a few thousand points if you spend a certain amount during the first three months, and that bonus is enough for a nice little reward. Some people are experts in credit card churning and often get free holidays thanks to their optimization skills. Those cards are perfect if you do not change your spending patterns, and spend more just to get the rewards. They generally have a higher interest rate if you don’t pay them off each month.
Premium credit cards
Finally, premium credit cards offer a lot of services in exchange for a yearly fee, set anywhere from under $100 to $500. Like the rewards credit cards, they are accessible to people with the best credit history, and require that you do your homework to see if the fee is worth paying for the perks you will be entitled to. Travel insurance, free access to airport lounge, concierge service, free replacement if you lose your passport, rental car insurance… are a few examples of the things offered by premium credit cards. If you travel frequently, or charge your business expenses on it, they can be worth it. The have a medium to high interest rate that will be costly if you cannot afford to pay them in full.
On a related topic, you can check my post on how to lower your debt payments
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