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Credit Cards

Your most pressing questions about credit cards, answered by a financial expert

Select rounded up frequently asked questions about credit cards and got expert Matt Schulz to answer them.

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Credit cards are a popular way to finance a variety of expenses from $20 gym memberships and $100 birthday gifts to college tuition and home renovations.

But regardless of what you use your credit card to pay for, it's always important to do your research to make sure you know how to use one responsibly. There's a ton of information out there and parsing through it all can feel overwhelming.

So, Select compiled a list of the most-Googled questions about credit cards and asked expert Matt Schulz, Chief Credit Analyst at Lending Tree, to provide answers. Here's everything you need to know:

Q: How do credit cards work? 

Schulz: "A credit card is basically a loan from a bank where a lender agrees to allow you to borrow up to a certain amount of money under the condition that you will pay back the amount you borrowed.

"We can talk about it in comparison to a debit card. With a debit card, you're spending money you already have in a bank account. But with a credit card, you're borrowing money that you don't have from a bank, and you're agreeing to pay it back over time. The longer it takes you to pay it back, the more costly it will be because of interest."

Q: How many credit cards should I have? 

Schulz: "There isn't a one-size-fits-all answer for this. For some people, the answer is zero because if you can't manage a credit card properly, it can do a lot of damage. It can put you in debt and damage your credit score, so if you don't feel comfortable with a credit card then it's okay to not get one.

"On the flip side, there are plenty of people out there with a dozen or more credit cards because they like rewards points. In truth, most people probably have two or three credit cards. This way, they have that one card they use on a regular basis and then they may have a second card to give them some extra wiggle room in case of an emergency.

"The best way to figure out how many credit cards you should have is to understand your own spending habits. If you're someone who carries a balance regularly, you probably shouldn't be focused on getting more credit cards to get more rewards; you should focus on paying the balance off as soon as you can."

Q: What is a secured credit card? 

Schulz: "I usually recommend that your first credit card is a secured credit card. A secured credit card operates like a regular credit card except you put down a security deposit to get it, which can be $200 or $250 (sometimes, you might be able to put down less). It's a good alternative to a regular credit card, especially for young folks who are just entering the workforce and can put down a couple hundred dollars to establish the credit card limit.

"They're low-risk because the limits are small and serves as insurance if you were to skip a payment. A secured card can be a really good stepping stone before getting a regular credit card."

Select rounded up the best secured cards to fit a range of consumers. The Discover it® Secured Credit Card, for example, has no annual fee, and you can earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter and 1% cash back on all other eligible purchases.

The Capital One® Secured Mastercard®, on the other hand, doesn't offer cash back, but some applicants can put down a deposit of just $49 to qualify for a credit limit of $200.

Discover it® Secured Credit Card

On Discover's secure site
  • Rewards

    Earn 2% cash back at Gas Stations and Restaurants on up to $1,000 in combined purchases each quarter. Plus, earn unlimited 1% cash back on all other purchases – automatically.

  • Welcome bonus

    Discover will match all the cash back you've earned at the end of your first year

  • Annual fee

    $0

  • Intro APR

    N/A on purchases

  • Regular APR

    22.99% Variable

  • Balance transfer fee

    3% intro balance transfer fee, up to 5% fee on future balance transfers (see terms)*

  • Foreign transaction fee

    None

  • Credit needed

    New / Rebuilding

*See rates and fees, terms apply.

Capital One® Secured Mastercard®

Information about the Capital One® Secured Mastercard® has been collected independently by CNBC and has not been reviewed or provided by the issuer of the cards prior to publication.
  • Rewards

    This card doesn't offer cash back, points or miles

  • Welcome bonus

    No current offer

  • Annual fee

    $0

  • Intro APR

    N/A for purchases and balance transfers

  • Regular APR

    26.99% variable on purchases and balance transfers

  • Balance transfer fee

    None

  • Foreign transaction fee

    None

  • Credit needed

    No credit history

Terms apply.

Q: How do I get a credit card? 

Schulz: "If you have a secured card and handle it well, the bank that issued you the card may reach out to ask if you want to get a regular (or unsecured) credit card.

"When you don't have much credit, often times the best place to apply for your first regular credit card is at a bank where you already have some type of account established, like a checking account or savings account. They may be more likely to extend you a credit card."   

Of course, you don't have to apply for a credit card at a bank you already use. You can apply from any lender, but you should do your research to make sure you apply for a card you feel confident you'll get approved for. Some banks offer credit cards that are meant for people with fair credit, for example. Others offer cards that are best for someone with excellent credit.

If you're not sure where you stand, check your credit score first and then fill out a prequalification form to see what offers you might qualify for.

Q: What is a good APR for a credit card? 

Schulz: "It varies, but it's important for people to understand that when you're just getting started, you're not going to get the lowest APR that you see offered for a card. It's important to understand where you stand with your credit score so you can adjust your expectations accordingly.

"The average rate on a new offer is about 19%, but interest rates can generally be anywhere from 15% to 23%. If you have really good credit, there are cards out there you can get with a lower interest rate, but if you're just getting started, you should brace yourself for higher rates." 

If you're worried about taking on an interest rate that's on the higher end of the typical range, you may consider credit cards with 0% intro APR offers. The Citi Simplicity® Card and the U.S. Bank Visa® Platinum Card are two cards that offer generous intro periods, so you can have a year or more to pay off your balance before you face interest charges.

Citi Simplicity® Card

On Citi's secure site
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for 21 months on balance transfers; 0% for 12 months on purchases

  • Regular APR

    14.74% to 24.74% variable

  • Balance transfer fee

    5% of each balance transfer; $5 minimum

  • Foreign transaction fee

    3%

  • Credit needed

    Excellent/Good

Terms apply.

Q: How do I pay off credit card debt? 

Schulz: "The best way to attack credit card debt depends on you — paying off debt is all about motivation and what's going to keep you moving forward. If you're someone who's motivated by small victories then paying off cards with the lowest debt balances on them and celebrating that accomplishment before moving onto the ones with higher balances can be a big deal.

"But the best place to start, regardless, is with a budget. There's no way to make a meaningful plan to attack debt unless you know how much is coming in and going out on a regular basis."

Q: How do you cancel a credit card?

Schulz: "Let's start with the fact that you don't necessarily have to cancel a credit card. Instead you might want to consider downgrading. The classic example of a downgrade is someone has a rewards card with an annual fee that they no longer use, so rather than cancel that card, they call the issuer and ask to have their account downgraded to a version without the annual fee. That saves you money without closing the credit card and triggering the consequences that come with closing the card

"But if you do want to cancel your card, you need to reach out to the issuer and let them know that you want to cancel it."

Q: Can you buy a car with a credit card? 

Schulz: "There can be limits that car dealers set when it comes to how much you can finance with a credit card. Using a credit card to purchase a car may be possible, but generally when talking about big-ticket purchases made with a credit card in pursuit of a big rewards points, the biggest question you need to ask is: What extra fees are involved?

"Often times, when you're buying a car, paying tuition, taxes, other out of the ordinary credit card purchases that may run into several thousands of dollars, those transactions often come with fees that override whatever value you would get from those rewards you would earn. If you have a credit card that gives 2% cash back and want to use it to pay tuition for your kid, but the college charges a 2.5% fee on the transaction for using a credit card, that's probably not a good deal."

Q: What is a balance transfer credit card?

Schulz: "A balance transfer credit card allows you to move the balance from your current card onto a new card, often with a lower interest rate. But what makes these cards so popular is that many will give you a period where you don't accrue interest at all on that transferred balance, and that can be a really big deal.

"There are many cards that come with an offer of no interest for 12 or 15 months on transferred balances and that can save you a lot of money in interest and really reduce the time it takes you to pay off the debt if you use it wisely.

"Keep in mind, though, that there are typically fees required every time you transfer a balance."

For rates and fees for the Discover it® Secured Credit Card, click here

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.