It’s expensive to live at Colorado altitudes. Compared to the national average, the cost of living is 19.6% higher for those in Denver, 18.3% higher for Fort Collins dwellers and a whopping 36.6% higher for Boulder residents, according to Salary.com.
That’s not to mention how economic challenges are affecting wallets across the country. The Experian 2023 Consumer Credit Review explains the average American carried a $6,501 balance on their credit cards in 2023.
If you find yourself reaching for your credit card, you’re not alone.
No matter where you live, if you need a credit card, choosing the right type of credit card for your needs and spending habits is key. Your credit card should complement your spending style and ultimately benefit your financial health.
All credit cards aren’t equal. Each carries a set of variables that impact their use and payments. There are many areas that vary across cards, including rewards programs, interest rates, introductory offers, payment minimums, fees, fraud protection services, mobile wallet compatibility, customer service options and retailer partnerships. You have to choose which features matter most to you and find a card that prioritizes them.
Here are three ways to choose a credit card that fits your needs:
1. Compare rewards and interest rates.
If you often use your card and pay it off every month, you probably want a rewards card.
Decide which rewards are best for you (cash back, gift cards, discounts to retailers, etc.), and find the card that gives the best rewards in that category. Cash-back rewards are very popular. Some cards offer as little as 60 cents per point, and some give as much as $1 per point or more.
On the other hand, if you’re going to carry a balance, pay attention to the interest rate of the card. For balance carriers, this can result in huge savings. For example, if you have a $1,000 balance on a card with a 20% interest rate and make the minimum payment of $30 each month, it will take you 50 months to pay off the balance and cost you $471 in interest over that time period.
In contrast, if you had the same $1,000 balance with a 9.99% interest rate, and you still only made the minimum payment, you would pay off your balance in 40 months and only pay $176 in interest over that time.
2. Get to know the interest and fees associated with your credit card.
Every credit card has fees, interest rates and requirements that must be disclosed and is generally a separate document available within an advertisement or application. If you’re considering a new credit card, or you already have a card but have never read the fine print, look at the credit card terms in detail.
Most credit cards have different interest rates based on transaction types. For example, using your credit card for cash advances or balance transfers may result in a higher interest rate or fee than if you use it for purchases.
Your interest rate may increase if you have missed payments, and this could be on top of late payment fees. If you have late payments, you should contact your credit card issuer to find out if your interest rate has or will be increased. You can save a lot of money simply by understanding how your card works and all the factors that affect your rewards and interest rate.
3. Look for travel-friendly cards
Travelers often have unique needs and preferences when it comes to credit card usage. Whether you’re a frequent flyer, a globe-trotting adventurer or someone who enjoys occasional getaways, choosing the right credit card can enhance your travel experience and provide valuable benefits. Here are some tips to consider:
- Select travel-friendly cards: Look for credit cards that offer travel rewards. Choose cards with flexible redemption options and rewards programs that align with your travel habits and preferences.
- No foreign transaction fees: Opt for credit cards that waive foreign transaction fees to avoid unnecessary expenses on purchases made abroad.
- Travel insurance coverage: Prioritize credit cards that offer comprehensive travel insurance coverage, including trip cancellation/interruption insurance, rental car insurance, lost luggage reimbursement, and emergency medical assistance. These benefits can provide peace of mind and financial protection during your travels.
- Airport lounge access: Consider credit cards that provide complimentary airport lounge access as a perk.
- Travel assistance services: Seek credit cards that provide access to travel assistance services, such as 24/7 customer support, emergency medical evacuation, roadside assistance and travel planning assistance.
3 ways to make secure and smart credit card choices
Once you’ve decided on a credit card, it’s important to use it securely and to improve your overall finances.
1. Protect your credit card information.
Security is a hot-button topic, especially for those who use their credit card to make frequent online purchases. Our credit card team here at Elevations Credit Union has a few recommendations:
- Set up mobile wallets so you don’t have to handle cards in person or transmit your card information. This also reduces exposure to credit card skimmers or website compromise.
- Never give out credit card details over the phone to someone who claims to be calling from your financial institution. Instead, contact the number on your card to follow up with any questions or concerns mentioned by the caller.
- Review your credit card statement each month. If you see charges you don’t recognize, investigate them and contact your card provider for assistance.
- Set up Card Alerts for your Elevations cards to monitor transactions and disable your card quickly and easily from your phone or computer.
2. Know how much you’ll spend on interest before you buy.
If you’re going to purchase a product or service and can’t pay cash or pay off the charges on your card in full at the end of the month, calculate the total cost of the interest you’ll pay based on how much of a payment you can make. Do the math before you buy. Our free tool can help:
Let’s say you’re buying an item for $1,000 and know you can only make the minimum payment. Are you willing to pay the additional interest in total for that item you’ll accrue over time?
This type of calculation can quickly put into perspective the true cost of financing a purchase using a credit card. It might be a reason to consider switching to a card that offers a lower interest rate to make purchases more affordable. It might also be a reason to hold off on an unnecessary purchase or to look for alternatives that are within your budget.
3. Build your credit profile using a credit card.
For college students and young professionals, using a credit card responsibly by making payments on time and keeping balances manageable helps build a solid credit history.
Later, when lenders evaluate your qualification for a large loan like a car loan or a mortgage for your first home, credit reporting bureaus will share your financial history as a credit card holder.
You can also access your full, updated credit report with credit-monitoring tools like SavvyMoney,* available for free for Elevations members in our digital banking platform.
The more you know, the smarter you spend
When you find a credit card that fits your needs and use it securely skillfully, it may help you manage your finances and improve your financial health for future purchases.
Have more questions about credit cards? Our team would love to help answer them. Contact us today .
*SavvyMoney is not affiliated with Elevations Credit Union. The credit union does not endorse or warrant outside products or services.
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