Choosing a credit card (CC) is a very important decision that can not only affect your current financial situation, but also your credit rating for years to come. The card you choose needs to be one that adequately suits your needs and one that you can afford, so you won’t end up in a constant cycle of taking out new cards to pay off old debts. Not all credit cards are the same and not all of them offer the same advantages. You need to decide what it is you’re looking for in a card first, then narrow your search down to the ones you can qualify for, that fit the bill.
Here are the top 5 benefits you need to consider:
1.) Annual Percentage Rate (APR)
Contrary to popular belief, a low interest rate is not necessarily the most important benefit to every cardholder. These low rates are most suitable for those who tend to keep at least a small balance running on their card or are transferring a larger one over from another card, with a higher rate. There are other benefits not typically associated with low interest cards, which may be more useful to someone who pays off their balance in full each month, such as reward programs. Before you jump at the first low APR offer you see, think about whether this is something you’re really going to benefit from.
You should also be aware that some cards offer a fixed rate APR, while others offer a variable rate APR. With a fixed rate card, the interest rate will generally be the same month after month, while the one on the variable rate card can fluctuate. Just remember that even if you have a fixed rate card, that interest rate might still go up if you’re late on a payment or you go over your credit limit. They can also change it just because they want to, as long as they notify you of the change, so be sure to read your agreement thoroughly.
When it comes to reward programs, there are a lot to choose from. There are cards that offer dining certificates, airline miles, gift cards, items from their own online store and even cash back. The trick is to find the one you’re actually going to use. If you really do eat out that often, maybe a diner’s club credit card would help you save some money. By the same token, airline miles are great for travelers, but not for someone who will allow them to expire. For the most part, the type of rewards almost everyone can use are gift cards and cash, although there may be certain restrictions and limitations that you should first be aware of.
3.) Credit Limit
How much credit do you really need? Can you foresee those needs changing in the near future? Take a really good look at your spending habits and make sure that the card you’re looking into will be able to meet those needs, because some low interest cards will have higher fees and interest rates that kick in, if you go over your credit limit. Additionally, it’s much easier to keep track of the fees and expenses on one card that actually meets your needs, than having to keep up with several, because neither one of them will extend you sufficient credit.
4.) Fraud Protection
Don’t ever assume that your credit card won’t ever get stolen or that you would never be irresponsible enough to leave behind, at a store or restaurant. It can happen to anyone and you should always read the fine print in your agreement, to make sure you’re covered.
Finally, you need to find out about any fees associated with the cards you’re considering. There are over-the-limit fees, annual fees, ATM fees, application fees, late fees and balance transfer fees that you can get hit with at one time or another, if not repeatedly. Not all credit cards charge every one of these fees and the amounts they do charge will vary from one card to another, so it’s best to find out first what you’re getting into and make sure it’s still a good deal. Remember that if you’re not planning on using the card very much, it doesn’t make a lot of sense to get one with a hefty annual fee. Similarly, if you’re going to pay so many fees on the card that they’ll cancel out any benefit from your reward program, you might consider a different card.
Ultimately, choosing the right credit card comes down to reading everything in those long and boring agreements, to make sure you won’t end up burying yourself in a pile of unwanted debt. Within that tiny print lies all the information you need to make an informed decision, while taking into consideration what you plan to use the card for and how well you’re able to manage debt. It’s really all about money coming in and going out of the same account. Your job is to make sure you get your hands on the right card, so you can keep it all in balance.
Jeff Noble has extensive experience as a personal finance consultant. His articles predominantly appear on personal finance periodicals online. Visit the CC link to find out more.