There are hundreds of credit cards to choose from, each with its own respective perks and fees. So how can you determine which card is the best one for you?

When used responsibly, credit cards are the best tool to manage money while also building up your line of credit. The key to properly maintaining a credit card is by paying your balance on time to avoid being charged late fees and damaging your credit score. However, keeping up with bills isn’t the only way to ensure you’re making the most of the card.

Story Highlights:

  1. Finding a credit card to fit your lifestyle will require research.
  2. Getting high cash back rewards does not mean your search is over.
  3. Do the math to find out if the rewards are worth the fees.
  4. Some fees are avoidable.

Finding the right credit card to fit your needs and lifestyle is not difficult, but it requires a little research. Nevertheless, don’t be lured to a card offering cash back and double points because that’s not necessarily the card you will get the most use out of.

If you happen to choose a credit card that offers a relatively high percentage cash back, be sure to calculate in dollars, what you are getting from the card since these cards often come with a steep annual fee. This fee usually hovers around $75.

For example, let’s say you apply for a credit card that offers 5% cash back on all gas purchases and has an annual fee of $75. In order to recoup the $75 fee, you would have to spend at least $1,500 on gas. If you don’t have a car in college or donʼt do a lot of driving, this would not be a smart decision.

You should also keep in mind that a card with no annual fee but offers a lower percentage cash back will also make money on the $1,500 gas expense. While you break even spending $1,500 on gas at 5%, a card offering 2% with no fee would have earned a cool $30. Donʼt be sucked in by flashy numbers and be sure to evaluate all the perks.

However, some fees are irrelevant, so don’t let them scare you from applying. For example, a card with travel rewards usually comes with high foreign transaction fees. This tends not to matter for American students, so if you are attending college out of state and plan on flying home a couple times a year, this may be a good card for you.

Thinking ahead, if you do end up flying to Europe you can use that card to book the trip and get miles, but use another card with no foreign transaction fees for purchases abroad. This way you can rack up flyer rewards and ensure you’re not overpaying on your purchases.

Once you’ve picked out a card that suits your lifestyle, you can focus on weeding out other fees the card might carry. Most of these fees can be avoided, and some are even optional.

The payment protection plan is the prime example. This plan offers relief when you are out of work or sick, and usually costs you around 1% of your monthly balance. Rarely do card owners cash in on such “benefits” and itʼs almost entirely useless for students. Avoid this fee by simply opting out of it.

Another fee that can pop up is an inactivity fee, which the card issuer will charge if the card is inactive for a certain amount of time. If you are a student who only plans on using your credit card in school, keep an eye out for an inactivity fee in the summer months. Avoid this fee by making one purchase a month with the card while at home.

A third fee that is easy to avoid is a paper statement fee. This fee applies to customers who choose to receive paper statements in the mail, or through their teller as opposed to viewing their account online. These fees can reach up to $9 a month and you can easily avoid it by using the Internet!

Always scrutinize your monthly statements and call up about fees that you are unfamiliar with in order to make sure you’re not getting ripped off.

Key Takeaways:

  1. Pick a card that suits your lifestyle. Donʼt pick a card simply because it offers the highest rewards.
  2. Cards with the highest cash back rewards often come with the highest annual fee.
  3. Take the time to calculate what you will have to spend to break even/make a profit on a card with rewards and fees.
  4. Avoid fees that aren’t necessary and examine your monthly statements.
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  • Sun W. Kim

    Stay debt free and then your options really open up.