Credit is an incredibly important component of your overall financial health. However, credit can be confusing for many people to figure out. After all, the concept of a credit score is somewhat abstract.

When you get a credit score check, the bureau looks at all your debt, your current credit lines (open loans, credit cards, etc.), how frequently and quickly you pay off your debt, any late payments or defaults, and your overall taxable income.

Then, your credit is scored based on these factors. Credit scores can range from 300 – 850. The higher the score, the better. 

Many people choose to use credit cards to build a history of on-time payments and boost their creditworthiness. 

Using Credit Cards to Build Credit

If you want to borrow money for a big purchase, like a car or home, you’ll need great credit. People who lack a strong credit history need to take some time to build their credit before they can be approved for many loans.

You can build your credit in a variety of ways, but one of the simplest avenues is to open a credit card. However, you need to be careful not to open just any credit card. All credit cards have different stipulations, interest rates, annual fees, and more.

By opening a line of credit and paying it off routinely, you can boost your credit score quickly. 

So, before you open a credit card, read below for five features to look for in a good credit card.

5 Features to Look for In a Credit Card

If you’re looking for green flags when it comes to what credit card to choose, look no further. We have compiled the top five positive features you should keep an eye out for when applying for your next credit card.

1. Low-Interest Rates 

The interest rate is a very important feature of a credit card. Each month, the expenses you charged to a credit card will come to you in a statement. The credit card company will automatically calculate a minimum payment for you based on your credit card balance.

However, it’s best to ignore that minimum payment and pay back all expenses on your credit card each month in full. 

If you can’t pay a full statement back, it’s always recommended to pay as much as possible. Whatever balance is unpaid by the end of the month, transfers over to the next month. With that transfer, comes interest charges. 

You can understand how interest can make paying off a balance even harder. So, take these tips to avoid interest payments or ensure they are as low as possible:

• Whenever possible - avoid carrying a balance from month to month. Paying off your balance in full before the month ends ensures no interest charge will be issued.
• Make multiple small payments over the month. There’s no rule that says you must pay it all in one day.
• Look for cards that offer low-interest rates, or special offers like 0% interest for the first year.

2. No Annual Fees

Lots of credit cards charge sneaky annual fees that can really put a wrench in your budget. Annual fees can be as low as $50 or as high as hundreds of dollars. However, there are plenty of great options for cards that don’t issue annual fees. Make sure you read the fine print to avoid annual fees.

3. Reward Points

Many financially savvy spenders make sure their credit cards are working for them. Most credit card companies have relationships with certain stores, gas stations, travel companies, and more that allow credit card holders to enjoy special perks. Each card has different offerings, so be sure to choose one that will benefit your lifestyle.

4. No Over-the-Limit Fees

You should avoid spending over your credit limit at all costs. This will certainly damage your credit. However, when it does happen, many credit cards charge a fee for going over the credit limit. This will only add injury to insult when you’re already dealing with a maxed-out card. Look for cards that don’t charge an over-the-limit fee.

5. No Penalty APR

A penalty APR is what happens when a car company automatically raises your interest rate after you pay a bill late. This interest rate is typically extremely high (like 25% or more) so you want to avoid it! We’re all human and paying late once should not cause you to incur crazy interest on your balance. Be sure to read the fine print and conditions of your card to ensure there is no penalty APR in place.

Conclusion

A credit card is a great way to build healthy credit if you are wise and responsible with the card you choose. You also need to ensure to make timely payments, and never spend much over what you can confidently pay back. By choosing a credit card with better features, you can get more out of your card and build your score more easily.

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