4 Key Factors to Consider When Opening a New Credit Card

When it comes to opening a new credit card, not all cards are created equal. Before you submit your next application, consider these four key factors that could affect your decision.

1. Fees

Most credit cards come laden with fees, so it’s important to read the fine print before signing the dotted line. Some credit cards come with an annual fee, but there are plenty of options that don’t. Especially if you’re opening your first or second credit card and plan to use it solely to build credit, look for a card that has no annual fee. Also, make sure to be aware of what the credit card company will charge if you make a late payment so there are no surprises down the line. You can avoid paying your bill late by setting up automatic bill pay reminders through bill and account organizing service Manilla.com.

2. Interest rate

The interest rate is also known as the annual percentage rate, commonly referred to on credit card applications and offers as the APR. Some cards come with fixed interest rates, so you know what it will be each month. Others have a variable rate, which can fluctuate. The credit card issuer, unfortunately, can increase your interest rate based on certain habits, like regularly paying late or surpassing your credit limit. To avoid having this happen to you, make sure to pay your credit card bill on time each month, and pay the balance in full. That way, you won’t pay any interest on the principle balance.

3. Rewards programs

Most credit card companies offer rewards programs, which allow you to receive points or cash back for making purchases with your card. Assess your spending habits to determine what type of incentive program makes the most sense for you. For example, if you’re an avid traveler, choose a card that offers airline miles and hotel points as a reward for usage. Or, if you like to shop, consider a card like the Citi ThankYou Card, which offers 20,000 bonus ThankYou Points after you spend $1,500 in purchases within three months of opening the account. You can redeem the points for $200 in gift cards.

4. Credit limit

While some creditors offer fixed credit limits based on the card itself, others determine your credit limit based on the applicant’s credit history. And depending on what you’re using the card for, the credit limit matters because it will affect your credit utilization ratio, which is the percentage of your credit limit that you use each month. Your credit utilization ratio should not be more than around 10 percent, so if you’re planning to spend $500 using your credit card each month, your credit limit needs to be at least $5,000.

Sarah Kaufman is the editor-in-chief of advice site The Manilla Folder at Manilla.com, the leading, free and secure service that helps consumers simplify and organize all of their bills and household accounts in one place online or via the 4+ star customer-rated mobile apps. Sarah is also a regular contributor to Yahoo! Finance, Good Housekeeping, Woman’s Day, Redbook, The Motley Fool, The Jane Dough and other sites.

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