5 Credit Card Questions Answered
Knowing the answers to your credit card questions can help you make smart decisions, whether you’re looking to apply for a new card, pay off debt or maximize benefits.
Article originally published on October 19, 2020 and refreshed on March 18, 2021.
With 377 million open credit card accounts, 75% of Americans have at least one credit card in their wallets. But how much do you know about these popular pocket-sized financial tools? Knowing the answers to your credit card questions can empower you to make smart decisions, whether you’re looking to apply for a new card, pay off credit card debt, or maximize benefits and rewards.
Here are answers to 5 frequently asked credit card questions.
Credit Card FAQ #1: Which credit card is best for me?
Do you plan to use the credit card as a loan to pay off a large purchase over time? If so, opt for a low interest rate credit card like the Zions Bank Clarity Visa® Credit Card*. If you expect to pay off the card’s balance in full every month, a rewards card makes more sense.
Generally, you trade one perk for another — rewards cards typically have higher interest rates, while low-interest cards tend to offer fewer rewards.
Some cards offer greater rewards on certain types of purchases, like travel or gasoline. For example, the Zions Bank Vivid Rewards Visa® Credit Card* offers 3 points per $1 spent in categories including dining, entertainment, transportation and digital services. If cash back is more appealing, the Zions Bank Agility Cash VisaBank® Credit Card*offers 1.5% cash back on every card purchase.
Credit Card FAQ #2: Why is a credit card important?
A credit card is a powerful tool for building credit, earning rewards and financing purchases. Paying your credit card bill on time each month is one of the easiest and most effective ways to improve your credit score.
When you apply for a credit card, pay your bill, or close an account, the data shows up on your credit report.
That information is synthesized into a credit score that helps lenders decide whether to lend you money and how much interest to charge. Your payment history comprises 35% of your FICO score.
Credit Card FAQ #3: Which credit card should I pay off first?
When it comes to paying off credit cards, there are generally two schools of thought. The “avalanche” approach involves paying off the card with the highest interest rate first; the “snowball” method starts with paying down the card with the smallest balance first.
While the avalanche method can yield greater savings, some people are more motivated by knocking out small debts first. Choose the method that works best for you, making sure to cover the minimum payments on all credit cards before focusing on a specific debt. Use this calculator to see how you can meet your repayment goals.
Credit Card FAQ #4: How does credit card interest work?
Most credit cards come with a variable interest rate, meaning the interest rate fluctuates according to an index like prime rate which is based on the federal funds rate and set by the Federal Reserve. If you pay your balance in full each month, you likely won’t see an impact from changing rates. But if you carry a balance, you’ll feel the impact of any interest rate changes.
Credit Card FAQ #5: Are credit card rewards worth it?
You can generally apply credit card rewards in one of three ways: turn them in for cash, earn a statement credit, or apply rewards towards a purchase. But some credit cards make it more difficult than others to earn and redeem rewards.
Before committing to a card, find out how you redeem reward points and whether they expire.
Which credit card is right for you?
At whatever stage you find yourself in life, a credit card can help you maximize your purchasing power and manage your finances. Compare the Zions Bank VisaBank® Credit Card* offerings on our website. Visit your nearest Zions Bank branch or apply online.
*Credit cards subject to credit approval. Terms, conditions and restrictions apply. See banker for details.
Kallee Feuz is a Public Relations officer with Zions Bank.