How to Choose a Credit Card
When it comes to figuring out how to choose a credit card, many people simply jump at the first offer that arrives in their mailbox. However, one should shop around for different credit card offers much like they would for vehicles. Choosing a credit card is actually a significant financial decision that can greatly impact a bank account in the long run.
First, consider what the purpose of the credit card is. Is it for general spending? To earn airline miles? To get money back on purchases? Credit card companies offer a wide variety of benefits. If choosing a card to earn airline miles, check to see if there are blackout dates or if the miles can only be used for certain airlines or to certain destinations. When seeking money back on purchases, compare companies to see who offers the most.
Beware of these benefit cards though, as many carry hefty annual fees. The cost of the annual fee can often cancel out the benefits received. Some companies are willing to negotiate the fee down for good customers after a certain period of time. Additionally, be sure to compare cash advance fees, balance transfer charges, and over-the-limit fees.
The greatest cost of having a credit card is the APR, or Annual Percentage Rate. This can range from nearly 0% to well over 20%. Based on credit history, this rate can often be negotiated with the company. Be wary of cards that have an APR that fluctuates throughout the year, known as a variable rate. Look for cards that offer six months to a year of 0% APR on purchases. A major purchase can be made and often paid off before APR is charged.
Most importantly, pay attention to what the credit limit on the card is. This, of course, will vary for each person based on credit history, but some cards are designed to only offer up to $500 in credit; some are unlimited. Too little credit can make the card usable for only a short time before having to be paid off; too much credit can appear detrimental on a credit report, and in the hands of the wrong person, can rack up a very large bill.
Many websites are available that compare credit cards based on desired factors. Check banks and credit unions for card offerings also--the benefits offered may not be as great, but the fees and interest are often lower if a bank account is open. Knowing how to choose a credit card is extremely important to anyone who truly cares about their financial future.
