If you’re a credit card-savvy consumer, you probably know that there are a few things you can do to make shopping for a credit card easier. You can boost your credit score so you have access to the best credit cards and the lowest APRs, for example. But there’s something else that’s worth doing before you commit to a new card.
Track Your Spending
You may have heard that when you’re crafting a budget it’s helpful to track your spending for at least a month so you know where your money goes. Well, the same principle applies to shopping for a credit card.
If you track your spending for a month or more, you’ll be able to see which categories get how much of your money. Armed with that information, you can shop for rewards cards that will bring you the most benefits.
For example, if you track your spending and find you spend hundreds on restaurant meals or travel, a points card that offers double points in those categories could be a good fit. Spend a lot of money on gas? A cash back card that offers extra cash for gas could be right for you. If you’re dedicating a big chunk of each month’s earnings to old, high-interest credit card debt, you might benefit from a balance transfer to a card with a 0% introductory APR for balance transfers.
At SmartAsset we help you do the math to figure out which credit card is right for you. If you’re considering credit cards that come with an annual fee, you want to make sure you’ll break even in terms of rewards. For example, if you’re considering a card with a $95 annual fee, you probably don’t want to end up getting only $80 in cash back or point value after your first year as a cardholder.
If you are on a tight budget or don’t spend very much on your credit cards, you might want to avoid an annual fee altogether. That way, you won’t have to worry about spending more than you earn in points or cash back. Credit card issuers count on a certain number of their customers paying more in fees and interest than they earn in cash back or redeem in points. You don’t want to be one of those customers, do you?
Related Article: Should You Get a Joint Credit Card?
The points-or-cash-back decision is an important one to make before getting a credit card, as is the decision of whether to pay an annual fee. You’ll be well equipped to make those decisions if you have a clear understanding of where your money goes each month and what kinds of rewards will benefit you most. Reviewing your spending might also help you identify fat you can trim from your budget, or make you realize that your current credit card isn’t providing the benefits you need. Once you have a card that meets your needs, don’t get carried away. The prospect of rewards can lead consumers to charge more on their cards than they otherwise would.
Photo credit: ©iStock.com/sturti, ©iStock.com/Petar Chernaev, ©iStock.com/mixetto