Best Credit Card for Good Credit
- Why is Credit Important?
- Pros and Cons of Credit Cards for Good Credit
- Finding the Best Credit Card for Good Credit
- How to Progress from Good Credit to Excellent Credit?
Before choosing a credit card, it’s important that you understand your unique spending style. This can determine whether a basic card, a cash back card, a general rewards card or a travel card right for you. In addition, you should know the minimum requirements for getting different cards, and then only apply for cards you’re likely to qualify for.
In your search, you’ll stumble upon a variety of credit cards, including cards specific to people looking to establish or improve their credit, as well as cards for people with exceptional credit. If your credit isn’t exceptional—but better than average—there are also cards designed with you in mind.
Credit scores range from 300 to 850, with good credit averaging between 670 and 739, according to FICO. With a score in this range, getting approved for a credit card won’t be too difficult. Still, applying for a card isn’t a decision to take lightly. The card you choose might be in your possession for years to come, hence the importance of selecting a card tailored to your needs.
Why is Credit Important?
If you don’t know much about credit, you might question the importance of caring about your credit score. Even if cash is your preferred method of payment, you should care about your credit because many high-ticketed items require financing. And sometimes, acquiring financing with no credit or bad credit is a challenge.
Financing is how many people get an education, purchase a house and buy a car. When you apply for any type of loan or credit card, the bank checks your credit report. Your credit file is a strong indicator of whether you’ll repay what you owe. It reveals how much you currently owe, as well as your most recent balances. It also provides a record of your payment history, allowing creditors to assess whether you’ve defaulted on bills in the recent past.
It’s also important to pay attention to your credit report and your credit score. At least once a year, order a copy of your credit report from each of the three credit bureaus, or request your reports from AnnualCreditReport.com. Carefully review your report, make a note of any erroneous information and look for signs of identity theft. Signs of a stolen identity include unfamiliar accounts appearing on your credit report. Aim to correct errors immediately. Negative items reported in error can drive down your credit score and make it difficult to qualify for loans and credit cards, even when you’re not at fault.
Pros and Cons of Credit Cards for Good Credit
Once you’ve checked your credit report and you’re confident in your ability to qualify for a credit card, now’s the time to apply for a card. However, make sure you understand both the pros and cons of these cards before applying.
- Lower interest rates. Since you have a positive history of paying your bills on time, qualifying for a credit card for good credit often means getting a lower interest rate. Interest rates vary depending on the card. Typically, people with lower credit scores are riskier applicants, and they tend to pay higher interest rates. But although credit cards for good credit usually feature lower rates, always compare rates among different cards to make sure you’re getting the best deal. You might find two credit cards designed for people with good credit, yet one credit card charges two or three percentage points more than the other card. If you carry a balance, a higher rate can result in more interest charges. If you’re interested in a low rate, search out cards that offer a 0% introductory rate for the first six to 18 months. Many of these cards charge zero interest on purchases and balance transfers during this period. Since the introductory rate eventually expires, you should also look for credit cards offering a low standard APR. This way, you save money once the interest kicks in.
- Better perks. Not only can you enjoy a lower interest rate, credit cards designed for people with good credit also include additional cardholder benefits. Some good credit cards have rewards programs where you earn points, miles or cash back on every dollar you spend. Of course, benefits and rewards vary from card to card. As you search for a credit card, also consider whether the card offers sign-up bonuses, price protection and an extended warranty on purchases made with the card.
- Requires good credit. To qualify for these cards, you must have good credit. Keep in mind, that some credit card issuers have different opinions regarding what constitutes good credit. So whereas one bank might classify good credit as a score of 670 or higher, another bank might classify good credit as a score of 680 or higher. To avoid surprises, contact credit card issuers and inquire about minimum credit score requirements before applying if this information isn’t listed on the application.
Annual fees. Because credit cards for good credit usually feature some sort of rewards program, you can expect to pay an annual fee to offset the cost of the rewards. Annual fees are based on the types of rewards and benefits available to you. These fees can be as low as $25 a year or up to several hundred dollars a year. Shop around and compare fees before making a final decision. Remember, any fees you may increase the cost of owning the card.
Finding the Best Credit Card for Good Credit
Credit cards designed for people with good credit are specific, and as a result, not everyone can qualify for these cards. Additionally, some of these cards might have features that you don’t need or want. To avoid applying for the wrong card, here are a few tips for narrowing down your options and selecting the right card.
- Don’t apply for the first credit card you find. With so many different credit card options available, never apply for the first card you come across. This card might seem like a fantastic deal. But if you don’t compare it with other cards in its class, you could miss out on some great offers. Ideally, research and compare at least three or four credit cards before making a decision. As you review these cards, compare annual fees, interest rates, foreign transaction fees, balance transfer fees, cardholder perks and rewards programs.
- Search for cards that waive the annual fee. If you find a credit card with a rewards program, you’ll likely pay an annual fee. If possible, apply for cards that will waive the annual fee for the first year. This way, you can use the card for 12 months and then decide if it’s the right card for you. If it isn’t, close the account before your first-anniversary date and avoid the annual fee. To determine whether an annual fee is worth it, create a list of all of a card’s benefits and consider what you’re getting in return. Annual fees are okay when the perks offset the cost.
Consider you’re spending needs. Just because a credit card is designed for people with good credit doesn’t mean it’s the right card for you. Some rewards programs might be popular with certain groups, but these programs might not be suitable if you use credit cards sporadically or only for emergencies. Do a self-evaluation and determine how often you’re likely to use the card. If you’re not a big credit card spender, a basic credit card without a rewards program might be a good match. This way, you can enjoy the convenience of a credit card without an annual fee.
How to Progress from Good Credit to Excellent Credit?
A good credit score indicates good credit management skills. But while good credit can help you score a low-interest rate and expand your credit card options, building an even stronger credit rating may guarantee the best interest rates possible on future credit cards, auto loans, and mortgages. With consistent responsible credit habits, you can potentially increase your credit score from the high-600s to the 800s. Here’s what you need to do.
- Continue to pay your bills on time. Excellent credit develops over time, and only after a long history of managing credit accounts responsibly. Since credit scores increase slowly over time, continue doing what you’ve been doing. Pay your bills on time every month, and never miss a due date. A late payment on your credit report could reduce your credit score by several points, and it can take a while to gain back these lost points. Remember, your payment history makes up 35% of your credit score.
- Keep your balances under control. Another way to progress from good credit to excellent credit is to keep your credit card balances under control. Using a credit card for nonessentials is tempting. But typically, the less credit card debt you have, the higher your credit score. Even when you make on-time payments, too much credit card debt hurts your credit score more than any other type of debt, such as mortgages, auto loans, and student loans. This is because credit card debt is revolving. Too much of this type of debt can be a sign of irresponsible spending. Always pay off balances in full every month. If you can’t pay off your balances, make sure you keep your balances at no more than 30% of your credit limit. The amount you owe makes up 30% of your credit score.
- Don’t cosign a loan. If you have good credit, family members or friends may ask you to cosign a loan for them. Cosigning can help somebody acquire credit. But as a cosigner, this debt will appear on your credit report, as well as any activity associated with this account. If the primary borrower defaults, the delinquency may show up on your credit report and hurt your score. Never cosign a loan for anyone.
- Don’t apply for too much credit. Applying for multiple credit cards in a short span of time can make you appear desperate for credit. From a lender’s standpoint, you might be experiencing some sort of financial difficulty. Each credit inquiry also reduces your credit score by a couple of points. Let’s say you apply for 10 credit cards within one week. This move could potentially reduce your credit score by 20 points, dropping your credit score from 680 to 660, which is a fair credit score range. Only apply for credit when necessary and spread out new credit applications. If you’re offered a store credit account while shopping, decline this offer to avoid unnecessary credit inquiries.
Be patient. Acquiring excellent credit requires patience. It can take several years to go from no credit to good credit to excellent credit. But the more positive activity appearing on your credit report, the sooner your credit score will increase. Check your credit score at least once a year to monitor your progress. It also helps to keep older credit card accounts opened. The length of your credit history makes up about 15% of your credit score, and the age of your oldest account determines the length of your credit history. If your oldest account is a credit card, and you decide to cancel this card, you could potentially reduce your credit history by several years. This can also reduce your credit score by several points. So keep older accounts open, even if you rarely use these cards. It’s also important to keep these cards active. Every couple of months, make a small purchase and then pay off the card immediately.
Credit is how you’re able to finance automobiles, buy a home and go to college. So it’s important to care about your credit score and do everything within your power to maintain good credit. If you’re looking for a new credit card, there are plenty of options available for people within your credit range. Compare these options, evaluate how you’ll use the credit card, and then make a decision. Once the card is in your possession, continue to manage your credit responsibly and you’ll eventually achieve an excellent credit rating.