Credit cards tend to get a bad wrap. When used responsibly they are actually extremely valuable and can be used to save you a lot of money on items that you already buy.
There are however still several factors that you want to look at before committing to one credit card. With over 1,000 credit cards offered in the United States, the task can be overwhelming. Here are some quick tips that will help you find the credit card that fits your needs.
What to look for in a credit card
Before shopping for a credit card
The first order of business is determine what the card will be used for and if you are able to pay off the full balance monthly or not. If they goal is to pay off the balance monthly, a rewards card is the best option for you. If not, finding a card with the lowest possible interest rate is key.
The next best advice in choosing a credit card is to read the fine print.
Advertisement and promotional products are meant to reel you in, but sometimes the hidden conditions aren’t as glamorous as advertised. This is especially the case if your credit score is not up to par. Credit card companies are known to offer an extremely low rate in advertising with the small print contingency that rates are based on your credit score. It is a good idea to check your credit score before applying for any type of credit so that you know what to expect. This also gives you the opportunity to improve your credit score which can make all the difference when applying for credit.
If you already have a credit card and are looking at other options it is always an option to negotiate better rates on your current card.
If your credit score is good and you carry a rate over 14%, a quick call to your credit card company may be worth it. It is quite possible that they will lower your APR in order to keep you. Otherwise, you can transfer your credit to another more appealing credit card with better rewards and rates. This is especially beneficial with credit cards that offering 0% interest rates on balance transfers. It is important to remember that this 0% rate is usually only for a few months and then the rate jumps up.
If your credit score is too low but you are financially responsible enough to handle debt, you may consider a secured card.
A security deposit is required on these and doubles as your credit limit. However, this is a great way to build your credit worthiness as long as the credit card reports to one of the three major bureaus.
If your goal is to find a credit card that offers the best rewards on items you already buy, the internet provides as a great tool to locate these cards.
It is a good idea to determine what you spend the most money on and find a card that caters to these expenses. If you are extremely comfortable in your ability to budget and control spending, credit card churning is a great option. This allows you to use two cards in order to take advantage of different rewards as well as time your purchases and payment dates to allow for the longest time period for repayment. Jeremy from Modest Money has a great comparison page of the best credit cards to find rewards that will fit for you.
Have you found the right credit card for you? How did you know what to look for in a credit card?
I like to have rewards cards. The rewards can add up quickly! 🙂
I am like Michelle – I like rewards cards. We’ll be funding our next vacation off of them. 🙂
Credit cards can be very useful both as a way of smoothing your monthly cash flows – after all you get paid in arrears so why not let the bank take the strain? As long as you pay them off every month there is nothing wrong with that. Bear in mind that the retailer pays a chunk – have you seen the amount that PayPal takes? In the UK credit cards are covered by an act that gives the bank shared liability – if something breaks or the retailer goes bust before your new TV is delivered, you can claim against the bank. And if you are thinking of using one for a few months short term loans (politely called ‘facility’) then do that on a different card. Then again you can have zero percent balance transfer cards – use these for that purpose only (check the repayment order – it’s been changed for the better in the UK recently).
Don’t forget that credit cards clear though a separate system to bank (debit) cards. A friend booked a hire car recently abroad but he doesn’t have a credit card. So the car hire company was unable to rent out the car. Fortunately someone else had a credit card and a drivers licence so it was OK but for car hire, hotel booking, etc etc credit cards are very useful.
I don’t have any credit cards, but this will be something I look at in the future.
Reward cards are nice. I have a Scene Visa haven’t paid for a movie in a while! Unfortunately, the cash-back and travel rewards seem to be a bit more limited in Canada.