The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
Quiz: Which Credit Card is Right for You?
1. How do you plan on using your card?
- I’ll mainly be making big purchases.
- I use my card just for the little things.
Big Purchases: Low APR
You may opt to get a card with a low annual percentage rate (APR) when you want to purchase items or services you can't pay for outright; for example, a much-needed air conditioning unit or a new flat-screen TV to replace your broken one. This means you'll more than likely carry a balance on the card from month-to-month. In that case, you'll want a card with a low APR and 0% introductory rate, since you'll be paying interest during the months you are unable to pay down your debt.
Little Things: Great Rewards
If you intend to use your card for lots of small purchases and pay off balances quickly, worry less about the APR and take a close look at the annual fees and reward program. If, for example, you eat out 4-5 times a week, choose a card with restaurant dining incentives and go chow down at your favorite sushi joint as much as you want. Though it does have an annual fee after the first year, Desert Financial’s Premier Rewards American Express offers the highest number of points on eligible dining purchases, plus a lower than average interest rate.
2. What would you prefer?
- Paying an annual fee but getting more rewards
- Having fewer benefits or higher late penalties, but no annual fee
No annual fee: Low APR
A lower interest rate on your credit card means less revenue for the card issuer and, consequently, less incentive to provide you with bells and whistles, according to U.S. News. It also means that the company may find other ways to turn a profit — like charging higher late fees and penalty rates. Some companies apply a penalty interest rate that can be as high as 27.24%. Ouch. The good news is that if you shop around, you could potentially find a lower interest card that doesn’t charge a penalty APR, like this Cash Rewards American Express.
Annual fee: Great Rewards
With great rewards often comes great cost. Some cash back or point-based programs carry annual fees, and it may not be a good idea to pay them unless you use a card for rewards purchases very often.
If you can earn $800 in airline points by paying a $99 annual fee, for example, then the card could be worth it. Choose a card that offers rewards on items you actually buy, though. What good are airline miles if you fly once or twice a year?
3. How much do you plan to use your card?
- All the time
- Once in a while
All the time: Low APR
If you are going to carry a balance from month to month, having a card with low APR could save you a lot of money in the long run. But be careful not to fill up your card with purchases too quickly just because it has a low APR or a bargain intro rate.
According to FICO, an analytics company that provides software that computes credit scores, regularly maxing out your card can damage your credit. So not only are you increasing your overall debt, you could be hurting your chances of getting a good rate on a car, home or even a new credit card.
Once in a while: Great rewards
If you know you’re only going to pull out the plastic in the grocery store, at the gas station or at the coffee shop, opt for a rewards program that gives you the most points for those purchases.
Using credit to pay for items you’d normally debit or pay cash for just to build up reward points carries its own set of risks, though. Scientific studies have shown that people are conditioned to overspend when they pay with a credit card.
4. How much would a 0% introductory APR offer appeal to you?
- Honestly, I’d rather have a steady and low APR the whole time.
- That sounds amazing, especially if I get rewards!
No: Low APR
With excellent credit, you may qualify for a credit card that has an APR of around 12-15%. While these lower interest cards will benefit your wallet in the long run, many don’t have perks like free balance transfers or 0% introductory rates, since the issuing company knows they won’t be making as much interest off you in the long run.
One exception is cards that have no rewards, but focus on rates; for example, Desert Financial’s Visa Platinum card. With this card, you’ll enjoy an extended 15-month intro rate AND a lower than average APR afterwards.
Pro Tip: Your credit card always has a 0% interest rate if you pay your balance off before your bill is due!
Yes: Great rewards
If you have good credit — and especially if you own a home — you’ve probably been bombarded with offers from rewards card companies boasting a 0% introductory APR. According to the Credit Card Accountability, Responsibility, and Disclosure Act (Credit CARD Act), this introductory offer period must last at least six months.
The interest rate on a rewards card for someone with “average” credit fluctuates between 19.99- 27.99% according to NerdWallet. However, you can often find lower rates at credit unions and community banks. For example, several of Desert Financial’s rewards card options including the Cash Rewards American Express have significantly lower rates and come with 0% APR for the first 6 months.
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