Which Credit Cards Will Help Me Meet My Goals?

Credit cards mean different things to different people. For some they’re a lifeline to get by from month to month, while others use them to streamline their cash flow and reap rewards.

Evan says he and his brother are having trouble navigating the jungle of cards with various interest rates and perks and would like your suggestions for which cards would be best for them.

He writes:

I was talking to my brother over the weekend and he was asking me if he should open a AMEX card because he got a good deal in the mail (0.0% for first year and 9.9% afterwards). I advised him against it because i have a Blue from AMEX and they raised my rate right before the new law took effect. He then asked what he should do because he wants to build some good credit. I know that a CC from a credit union is a good bet, but he doesn’t trust the credit union he’s with now.

Add to this that I make slightly more than $30,000 and carry slightly more than $3k in credit card debt.

So the question is, whats the best card for him(to build credit), and whats the best card for me (to transfer the balance and pay it off)?

There are several website that will help you research this information. Bankrate, for example, lets you research cards based on credit score, card type and issuer.

CreditCards.com offers a similar search.

If you’re interested in building a good credit score, the most important thing to worry about is making sure your credit profile matches what FICO considers ideal. You can take a look at what they use to determine your score here.

The factors they consider are: Payment History, Amounts Owed, Length of Credit History,New Credit and Types of Credit Used.

Here’s how they explain “types of credit used”:

Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

In short, the best way to build credit is to learn about how your FICO score is calculated and do your best to manage your credit responsibly. As you can see, you can accomplish that goal with a card from AMEX or a credit union, so do some research and find the best card for your unique situation.

Comments

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  1. Evil_Otto would rather pay taxes than make someone else rich says:

    Bankrate makes me suspicious. Their tie-in to the online application process makes me question their impartiality and accuracy.

  2. Oranges w/ Cheese says:

    Ignore the interest rates and get a low limit card. Buy gas. ONLY gas. Pay it off in full every month. Once you’ve done this for several months – a year, you can get a better card you can use for real credit card purchases and emergency expenses where the interest rate DOES matter. But you have to have credit to get it, so do this and you’ll be good.

    JUST MAKE SURE TO PAY IT OFF EVERY MONTH. The key to that is the small purchases.

  3. econobiker says:

    Pay off the credit card debt and then only use your credit card for items for which you have money already saved up.

    (Or if you are a credit and checking account budget reconciling nerd use a card for monthly expenses for which you already have money and harvest frequent flyer points, rewards, etc.)

    • cheesebubble says:

      I agree wholeheartedly. I racked up credit card debt in my younger years. Upon paying it off, I cut up my card and only dealt with cash for several years. That experience did some damage, however, as it was tough for me to successfully apply for another card last year. I did snag one, however. It involves a low limit, an annual fee, and high interest. But since I learned a hard lesson the first time around, I am now using this credit card wisely. I apply it to the odd purchase (mostly online shopping) and immediately pay it off because I have the money in my bank account to cover what I’ve bought. I should have operated on this system from the get go.

  4. areaman says:

    To build credit… something with lower limit and rate. To pay off… maybe get a card with a low rate, transfer balance to it and use different card for new purchases. Of course new purchases should be paid every month or you ll be trapped in a revolving debt loop.

    • Rachacha says:

      Definately agree with trying to do a balance transfer to a lower interest rate. Just make sure to look at the balance transfer fee and weigh that fee against the interest you will pay on your current credit card. For example, if you are currently paying a 9.9% interest rate, it may not make sense to move to a 6% interest rate card and pay a 5% balance transfer fee, but if you can get a 0% introductory rate card with a 5% balance transfer fee it might be a good financial decision provided you do not use that card for anything until it is paid off 100% as you will pay 0% on the balance transfer, but 15% on purchases.

      I paid off my mortgage using 0% interest credit cards…sure, I’ll pay 5% interest capped to $50 to transfer over $20,000 from my mortgage to a credit card for 18months.

  5. pecan 3.14159265 says:

    Well, first, the interest rate doesn’t matter if Evan’s brother is financially stable and has no debt. If he develops good financial habits, the AmEx blue is a good way to earn rewards and build credit. Just because the interest rate isn’t good for Evan, doesn’t mean it applies to his brother.

    Now, onto Evan. Since Evan has $3,000+ in debt, he needs to figure out how long it will take him to pay off that debt and he needs to do it in the time frame the credit card company is allowing for 0% or very low interest. Certain companies are more stingy than others. Capital One, for instance, is fairly conservative with its credit.

  6. Quake 'n' Shake says:

    Get a card, run up a high amount of debt. Then, get a new card with a lower limit, do a balance transfer to the new card. Lather, rinse, repeat.

    Oh wait, I missed the “responsibly” part. Never mind.

  7. Etoiles says:

    If you are eligible in any way for a USAA card, I strongly recommend going with them. My interest rates and customer service have been stellar since I opened the account in 1999. I think “not being jerked around” is worth having a slightly less awesome rewards structure than some competitors.

    (When I opened the account, it had a $500 credit limit. Over time, as I used it and paid my bills, they raised it rather enormously to the [unused!] 5-digit limit it has today.)

    • Nigerian prince looking for business partner says:

      I also use USAA. I’m amazed at the number of readers here who are fellow vets.

      • Etoiles says:

        Maybe not as many vets as you think? ;) The eligibility net is pretty wide these days… I was eligible through my dad and my husband could have a card thanks to being married to me, if he wanted.

  8. Tim says:

    Whoa. These comments make it sound extremely complicated.

    I was in a similar situation shortly after graduating college. So I just applied for a basic, no-rewards card. I got the card and now I use it a few times a month and pay the balance off. Seems to be working just fine.

  9. Design3r says:

    Just run, throw them away, don’t use credit cards.

    • jamar0303 says:

      Having no credit isn’t exactly the best position to be these days. Like it or not, credit checks are also used in some hiring processes these days. And if that’s the only option available to you, better to have a good credit rating than a blank slate. “Known good” is better than “unknown”.

  10. photoguy622 says:

    Don’t bother building credit! I got sucked into that mentality years ago and it was a waste of time and money. They will get you every way they can. I was foolish for running up a balance, but I recently paid it off and it will never happen again. If you want to game the system and get a rewards card and pay it off every month do that, but don’t get complacent.

    I live on cash mostly now, and I really do spend less.

    As far as transferring the $3000 debt goes, wait until you get an offer for 12 months 0% interest and no balance transfer fee. If you get an offer with a fee, see if you can get them to waive it. Some of the balance transfer fees are obnoxious. Whatever you do make sure you have a budget in place to pay it all off before it starts accruing interest.

    Good luck to both of you.

  11. ellemdee says:

    I get so frustrated with the credit score game and I’m conflicted about getting a credit card at all. I don’t have a credit card and I have no need or desire to get one, and yet I’m in the position where I have to get one in order to raise my credit score. I have a blemish-free credit history – car loan (paid off in 1 year), mortgage (paid off in 6.5 years) and a couple of store cards which are closed now (stores went out of business or stopped offering cards), so I have no open lines of credit and the concept of having multiple open lines of credit if I don’t need them goes against my “dont buy it if I can’t afford to pay for it now” philosophy. I would think that my credit utilization score would be 0% since I have no debt, but my credit report shows it as 100% since I have no currently available lines of credit.

    So I guess I’m stuck getting a card if I want to increase my credit score. With no late payments and a 30 year mortgage paid off in 6.5 years, I’d think my score would be great, but instead it’s just average. I’ve demonstrated not only that I can get credit extended to me, but that I can afford to actually make the payments and then some. Yeah, the formulas are messed up to the point where, if you want to raise your score, it’s not about being responsible, it’s about gaming the system.

    • photoguy622 says:

      Wow! That’s great! Congratulations on your financial successes.

      • outshined says:

        You are both totally inspirational. Working on budget now, I will refer back to your posts every time I get the urge to spend money on crap.

  12. cheesebubble says:

    I agree wholeheartedly. I racked up credit card debt in my younger years. Upon paying it off, I cut up my card and only dealt with cash for several years. That experience did some damage, however, as it was tough for me to successfully apply for another card last year. I did snag one, however. It involves a low limit, an annual fee, and high interest. But since I learned a hard lesson the first time around, I am now using this credit card wisely. I apply it to the odd purchase (mostly online shopping) and immediately pay it off because I have the money in my bank account to cover what I’ve bought. I should have operated on this system from the get go.

  13. Tenacity says:

    We are refinancing and the loan officer told me a few interesting things.
    (1) Old open credit is not necessarily a bad thing. (We weren’t even sure what some of the old open accounts on my husband’s credit report are!) The loan officer said that shows we have credit we elect not to use–a zero balance on an old account is good.
    (2) Only use about 30-40% of the available credit on any card.
    (3) Avoid having store credit cards, especially new accounts. My husband was enticed to open one to obtain a discount on a purchase he made at Sears. He now has a new credit account with a $5000 credit limit. Our loan officer said we should close it; the store cards affect credit scores negatively.
    (4) The free credit reports don’t match the ones the bank orders when you apply for a loan.

    “And how do I learn these things?” I asked the loan officer. She said the Fannie Mae & Freddie Mac websites might help. She said she received special “coaching” that she paid for herself in order to best advise her clients. You’re guess is as good as mine on that one.

  14. Tenacity says:

    We are refinancing and the loan officer told me a few interesting things.
    (1) Old open credit is not necessarily a bad thing. (We weren’t even sure what some of the old open accounts on my husband’s report are!) The loan officer said that shows we have credit we elect not to use–a zero balance on an old account is OK.
    (2) Only use about 30-40% of the available credit on any card.
    (3) Avoid having store credit cards, especially new accounts. My husband was enticed to open one to obtain a discount on a purchase he made at Sears. He now has a new credit account with a $5000 credit limit. Our loan officer said we should close it; the store cards affect credit scores negatively.
    (4) The free credit reports don’t match the ones the bank orders when you apply for a loan.

    And how do I learn these things, I asked the loan officer. She said the Fannie Mae & Freddie Mac websites might help. She said she received special “coaching” that she paid for herself in order to best advise her clients. Your guess is as good as mine on that one.

  15. TasteyCat says:

    Amex won’t raise his rates unless he misses a payment, and then he’s got more to worry about than his Amex rate. Of course, Amex has a tendency to walk all over its customers, so I wouldn’t actually suggest them regardless.

    To build credit, store cards and credit unions are good (there are plenty of credit unions anyone can join, such as Alliant and Penfed, both of which are on my list). Orchard, First Premier, and secured cards are also alternatives (albeit far from ideal).