What Kind of Credit Card Is Right for You?

While a card that lets you rack up travel points when you shop may sound tempting, look beyond the advertised bonuses to decide which one best suits your needs. If you're just beginning to build credit, you might want to start with a more basic card before diving into the world of rewards cards and their potential fees. Let's take a closer look at what kind of credit card user you are and how to best maximize your cards' usefulness.

Do You Need to Grow Your Credit?

If you don’t have credit or need to build your credit, a secured card might be a good option for you.

With a secured credit card, the account holder makes a refundable security deposit that’s equal to or greater than the credit limit. You’ll receive a monthly account statement detailing purchase and payment activity, account balance and minimum payment due information. Using your secured credit card will build a credit history with the three major credit bureaus, somethings prepaid and debit cards can't usually do.

Are You Carrying a Balance?

If you're trying to build credit or use new cards to manage existing debt, a zero percent interest credit card may be the right choice for you:

• Zero Percent Interest Credit Card: If you're looking to lower your monthly payments, many lenders will offer cards with a zero percent interest introductory promotion. For the first 12 or 15 months, you may not have to pay any interest on purchases or balance transfers. The latter is what you want to pay attention to if you're looking for a way to better manage your debt. By transferring an existing credit card balance to your new zero interest account, you get a break from the burden of monthly interest. But remember that once the promotional period expires, interest will kick in on that account, too. Make sure to read the fine print on what that interest rate will be, and use that buffer period to either pay off the debt or come up with a long-term strategy for coping with it.

Are You Paying Your Credit Card in Full?

If you pay your balance in full most months, you may benefit from a rewards-earning account. Take a look at some of your spending habits and then consider finding a card that will reward where you spend the most. Here are a couple of options depending on whether you're spending more on travel, groceries, or general spending.

• Cash Back Card: If your spending is more on the general side, you may want to look into a cash back card. These cards typically assign a percentage back for every dollar spent on your card. To get the most of your cash back, look for a card with a high percentage back, like 2%. The cards with a straight earn fee usually equate to more cash back than cards that assign different rates based on how you spend. Cash back cards also allow you to receive your payment as a statement credit to help reduce your balance, or as a direct deposit to a checking or savings account, helping you grow your savings and improve your financial wellness.
• Rewards Card: If you’re interested in earning points that can be redeemed for, everything from gift cards, to travel, to cash back, and more, there are many different reward cards available. Look for cards with no caps or monthly limits on the amount of points earned. Some cards offer bonuses if you spend a certain amount each month.
• Travel Reward Cards: Travel reward cards can provide benefits for people who jet around the country several times a year. Oftentimes, you'll earn double miles when you purchase flights and services through the airline affiliated with the card, allowing you to earn rewards that much faster. Before applying for a card, however, you'll want to decide which types of rewards are most valuable to you. Be sure to read through all of the associated benefits as well. Some cards come with additional perks, such as dining credits, and discounts at certain hotels and tourism properties - those details may sway your decisions. You'll also want to compare annual fees across account types. Some premium travel cards have annual fees of $400 - $500 and up. So, if you don’t travel a lot and don’t earn enough rewards to cover the costs, this type of card might not be the best option for you.
• Grocery and Gas Station Credit Cards: If you're a frequent grocery buyer or have a long driving commute, you may be able to earn cash back rewards while loading up on provisions and gas. In many cases, traditional lenders provide far more favorable rates and rewards than you would find through the stores themselves. Some cards offer as much as 4 percent cash back on grocery purchases and 3 percent on gas. As with the travel reward cards, some accounts include extra perks such as cash bonuses for spending a certain amount within a particular period. You may also find that rewards cards include zero interest promotional periods—allowing you to combine debt management with travel and cash back benefits. Other cards allow you to earn 5 percent cash back at restaurants and wholesale clubs. Because these cards only offer the highest percentages on certain categories, your overall cashback may not end up being what you expect. Some cards offer a consistent reward, such as 2%, on every purchase, no categories, no caps.

How to Use Your Credit Cards Wisely

Credit cards can be incredibly helpful for achieving any number of financial goals. But if you're not careful, they can have the opposite effect. As a rule, it's best not to charge more than you could afford in cash. Whether you're using a secured credit card or airline miles card, ask yourself whether you'll be able to pay your bill in full when it arrives. If the answer is "no," reconsider the purchase.

Resist the urge to open several new accounts at once, no matter how enticing the rewards are. Opening too many accounts at once can negatively impact your credit score. You can achieve good credit hygiene by understanding your goals and habits. Knowing which credit card is right for you becomes much easier once you know yourself.