It’s easy to feel overwhelmed by all the options in the credit card market. There are so many different cards with different rewards programs and interest rates it can take time to know where to start. If you’re like me, you’ve probably had a few cards that didn’t live up to their hype (or, even worse, charged an annual fee). This post explains how APR differs on different cards so that you can make sure your next credit card is worth it!
The first kind of card you should look for is a low-interest card. This means that the interest rate on your balance will be lower than average, making it easier for you to pay off your debt and get back into the black. Some great options are cards with no annual fee or low introductory rates. At the most basic level, these cards have lower-than-average interest rates and can help prevent headaches if you carry a balance from month to month.
As per SoFi experts, to get a good credit card APR you have to “Make 12 monthly on-time payments —of at least the minimum due—and we’ll reduce your APR by 1%.”
Balance Transfer Cards
If you’re looking to consolidate your debt, transferring balances from an existing card onto a new one can help. Balance transfer cards offer 0% introductory APRs on balance transfers for a set period—usually between 12 and 21 months—giving you time to pay off the debt without accruing interest. However, these cards also have some important restrictions: they usually don’t have rewards programs and often have higher rates after the intro period ends.
Cash Back Cards
Cash-back cards are the simplest type of reward credit card. You’ll earn a flat amount of cash back, usually around 2% to 3%, on all purchases made with your card over the course of the year. Cash-back cards do not have an annual fee and don’t have any spending caps or categories that earn more than other purchases.
Because they offer a simple way to earn rewards, cash-back cards generally carry higher APRs than other rewards credit cards. They also tend to be less flexible as far as earning rates go; for example, if you don’t pay off your balance in full each month, then you won’t be able to take advantage of the lower interest rate offered by paying off part or all of your balance before interest is charged.
Rewards cards usually come with higher APRs than cash-back cards. These cards offer extra perks and benefits, such as travel rewards or airline miles. If you use a rewards card, understand the terms and conditions before applying for it. Rewards also come with annual fees, which means that if you want to keep your credit score high, it might be better to go for a cash-back card instead.
Airline and Hotel Reward Cards
Airlines and hotel reward cards can be a good choice if you’re a frequent traveler. These cards offer points that can be redeemed for free flights or hotel stays.
But before applying for one of these types of cards, look at the annual fee and make sure that the value of the rewards you’ll earn is worth it—you don’t want to pay an annual fee only to find out you’re not using your card enough to justify paying it in the long run.