Choosing the Right Credit Card

Some people manage to go through life without a credit card.  I don’t know how they do it, (as I am not one of them) but they are to be commended.  But for the rest of us a credit card is quite often a necessary thing.  So, for those of us that require one, it makes good sense to know what to look for when applying for a new card.

Less than Perfect Credit
If you have less than perfect credit, you are going to be limited in your choices, and you are going to pay a higher rate of interest.  There’s no way around that.  But you do have some choices.  Do not choose the first credit card offer that heads to your e-mail or your mailbox.  Compare the rates of interest, the penalties for late payments and other such fine print.

Introductory Interest Rates
If a credit card comes with a low, introductory interest rate, see how long it lasts and what triggers a change to a higher rate.  For example, if you are late on a payment, does that mean that your introductory rate will be removed in favor of a higher rate?  This could be the case, so read carefully.

Balance transfer fees
Are you looking to transfer high-interest rates cards to lower interest rate cards?  It’s a smart idea, but be aware that with almost every card, be it targeted at a person with good credit or bad credit, will come with a balance transfer fee.  That means approximately 3% of your of the transfer amount will be added to the card balance.  So if you transfer $3,000 from one card to another, your transfer fee will be $90.
So before you transfer balances, make sure that the amount that you will save will be more than the transfer fee.

Reward Cards
Many cards are tied to rewards programs.  I for example, have a card that accrues airline miles.  Others accrue points that you can use for a variety of different purposes, be it department store gift cards, flowers and more.  American Express has a points (rewards) program, but it is not free.  You have to pay a certain amount each year (approximately $50) to be enrolled.

Read the fine print to see which rewards program is best for you.  I can tell you that my airline miles card has come in handy on numerous occasions.
Be weary of cards that are marketed with an offer of some sort that gives you a bonus in the form of rewards points, if you charge a certain amount on the card.  (Be careful, as balance transfers do not normally qualify). Don’t overspend in your quest to get the bonus.  In most cases you will pay more for that “bonus” in credit card charges than you would have paid if you had paid for it outright.
But if you control your spending and still meet the bonus requirements, then that type of offer is worthwhile.

Other Points to Consider
With the help of, here are a few other factors to consider.
•    “Ignore flattering marketing.” Great tip.  When a credit card company says you’ve been pre-selected or you’re pre-approved, don’t believe it.  You’re pre-selected to be on the mailing list and nothing more.  The claim means nothing in reality.
•    Store credit cards usually carry higher rates of interest.  Without naming names, store credit cards usually have rates that are higher than your typical Visa or Mastercard.
•    Are you trying to reduce your credit card debt?  Determining which card to pay off first is easy.  Pay off the higher interest rate cards first.

What happens if your rates are the same, but you have one card with a higher balance than another?  I recommend paying off the lower balance cards first.  Here’s my thinking.  When you pay off a credit card, there’s a real sense of accomplishment to it.  Use that good feeling to keep yourself on the path to lower debt.  Also, when you pay off a credit card that frees up some money that you can use to pay off your other card.  By doing it this way, you will pay it off that much faster.

The moral of the credit card story is this.  Define what you are looking for in your new card and conduct your research.  Remember, cards are not created equally.  Do not choose the first to make you an offer.

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