Choose Your Credit Card Wisely

Low fees. The best rates. More rewards.

“People choose which credit cards they carry for a variety of reasons,” said Eric Ayers, loan officer at Eaton Family Credit Union. “It’s important to choose the best one for your lifestyle because they can have a considerable impact on your financial health.”

Ayers said 73 percent of respondents in a 2018 Ohio Credit Union League survey stated they use at least one or two credit cards every month. Of those, 39 percent carried up to $1,000 in credit card debt and another 30 percent owed between $1,000 and $5,000.

According to the League’s Quarterly Performance Summary, the average credit card balance held during the second quarter of 2018 at Ohio credit unions was $2,142, Ayers said.

With the possibility of carrying such a significant amount of debt on a credit card, it’s not surprising consumers want to shop around before choosing a card, Ayers said. “About 44 percent of respondents in the League’s consumer survey said they look for the best interest rates and lowest fees in their credit cards.”

A recent Experian report found most Americans shop for credit cards with a similar mindset: 54 percent seek out a card with no annual fee while 40 percent look for a low-interest rate. Another 45 percent of Americans and 32 percent of Ohioans said perks, including points for travel, discounts, and other rewards, could influence them to apply for a card.

While Americans might have clear motivations for seeking credit cards, it doesn’t mean they’re easily finding the cards that suit their needs, Ayers said.

Consumers know they should shop for the best credit card deals, Ayers said.  But, according to Experian’s survey results, 69 percent of Americans said they feel researching the correct card is too time-consuming. Another 61 percent said they become overwhelmed by the number of options available and 57 percent said it’s too difficult to tell which card would work best for them.

“Interestingly, the Experian survey also found 64 percent of respondents said they believe their perfect credit card is out there but they just haven’t found it, yet,” Ayers said.

Ayers recommends the following to help find the perfect credit card:

• Check your credit. Higher credit scores are more likely to be approved for credit cards with better perks while borrowers with lower scores may need to shop around more. It’s best to begin the research process knowing your score, rather than being declined for the credit card you want after searching. Federal law entitles you to a free copy of your credit report from each of the three major credit bureaus every year. Visit AnnualCreditReport.com to get your free credit reports.
• Figure out what type of credit card you need. According to NerdWallet, there are three main types of credit cards. Consumers can choose between cards that help improve limited or damaged credit, cards that save money on interest and cards that earn rewards. Additionally, some consumers choose cards to transfer a balance from an existing credit card. Be sure you’re choosing the card most beneficial to your current situation.
• Decide how likely you are to carry a balance. If you know your credit card will carry debt you won’t be able to pay off right away, you should search for cards with low annual percentage rates. Otherwise, you could end up with card payments that don’t fit your budget and that drag out repayment longer than expected. For example, a card with an 18 percent APR would accrue $1,138 in interest on a $3,500 balance, according to CreditKarma.com. Making $120 payments on that card each month, it would take more than three years to pay it off. Make sure you know how much you can realistically afford to pay in finance charges each month and shop around accordingly. 
• Read all the fine print. Thoroughly research and understand how your potential credit card will fit into your budget. You may be attracted to a card because of its 0 percent APR introductory offer but make sure you understand how long that offer lasts and what you’ll be paying in finance charges once that rate changes. Some cards also include annual fees, late fees and foreign transaction fees you should be aware of before you apply. Be sure you understand everything about your new card so you can use it as wisely as possible.
• Look to a credit union. The unique business model of credit unions allows them to offer competitive rates on credit cards along with generous reward programs.