Choosing the Best Credit Card
If you do a search for credit cards online, you will find hundreds of offers. There are the major credit card companies offering a number of different cards. Then, there are store cards, from most major retailers. You will find credit cards from local banks. You will even find them from entertainment venues, airlines and hotels. Choosing the right one may seem like an overwhelming process. After all, there are so many different options to choose from and each one seems to lure you in with an attractive offer.
Compare Credit Card Options Before You Apply
Before you obtain a new credit card, it is critical to get all of the facts associated with that card. You need to look at how the card fits your lifestyle, too. It is all of the individual details that you need to learn about before you actually accept or apply for one. Here is a rundown of some of the things you need to know about any offer you receive before you agree to use it.
- Interest Rate – The credit card interest rate is one of the most important details you need to know about. The price you pay to borrow money is this. You need it to be as low as possible. No other part of the credit card offers is more important than a low interest rate – unless you do not plan to carry a balance from month to month. You also want to know if it is a variable rate (which will change as interest rate index rates change) or a fixed rate (which will remain the same over the entire loan period.)
- Annual Fees – This annual fee, or membership fee, is charged to your account each year. It can be expensive. Some cards do not charge it, especially if you have a good credit score. However, you can contact your lender and find out if they will drop this fee from your card, especially if you work with them long term.
- Rewards – Rewards come in all forms, from free airline tickets to cash back promotions. Rewards are not always a good thing, as you will see in a minute. It is a good idea to consider the relationship between the reward offer and the actual interest rate (often, you will pay more interest to have a rewards program.)
- Other Fees – Look for the fee structure for the card, including whether there are penalty fees. A penalty fee is a dramatic increase in your interest rate if you miss a payment or go over your limit. Look for different interest rates and fees for cash advances and balance transfers, too.
- Introductory Offers – Many lenders will offer you an introductory offer, such as paying zero percent APR for 12 months if you sign up. These can be a good thing, because you are not paying interest, but still look beyond the offer. What is the interest rate and fee schedule after that initial period ends?
All of these factors must be provided to you from the credit card lender before you accept the offer. Read the terms and conditions to learn of all fees and the details.
Using Rewards Cards
It is easy enough to choose a credit card with a low interest rate, but how can you obtain a credit card that offers good rewards programs? First, realize that these offers often have a higher interest rate. To ensure this does not affect you, pay off your balance in full each month. Choose an offer without an annual fee, if possible. Then, consider the following tips for using this type of credit card.
- Choose a program you actually will use. If you do not fly often, a frequent flier program from an airline is less useful than a cash back program.
- Many companies assume you will not cash in. If you get into a rewards program, use those benefits!
- Do maximize the use to earn free items or to get cash back, but only when you can control it. For example, if you make all of your purchases on a credit card to earn free airline miles, pay off the balance in full each month. Otherwise, the fee you pay in interest negates the benefits of the free miles.
- Know how to redeem the rewards and what they get you. One mile earned, for example, may not mean one mile in the air. You also need to know how much you can earn within a time period and if your bonuses expire. All of these things should be provided to you before you apply.
- Realize that the company can shut down rewards programs at any time. Be aware of what the overall cost will be to you to use the card.
The more you know about a credit card’s reward program, the better you can make a decision about whether it will benefit you or not. Just because it seems free, do not think it really is.
Make wise decisions whenever you use any credit card. Know how you plan to use the card. For example, if you plan to use a credit card that allows you to earn free gas for your purchases, plan to use that card for a certain amount of money each month, an amount you know you can pay off within the grace period. Then, pay it off. That way, you earn the free gas without paying the interest rate.
Sometimes, no rewards program is the best route to take. Realize that numerous credit card companies are out there that do not offer rewards programs, while others offer numerous types. Choose one that is right for you, or go with a credit card with the lowest interest rate and the best fees. When you look at all of the details for the various cards available to you, you can determine which one is most likely to give you the best overall offer. Do compare cards to get the right one for you.