How to choose a credit card
Introduction
Choosing a credit card can be confusing. Many of us are solicited by credit card companies at least once a week or more often. Credit card companies are often tricky in the methods that they use to lure customers into signing a contract with them. Many times even reputable credit card companies will have fees, contractual clauses, and other "fine print" items that lead to regret for the new card holder.
Instructions
Choosing a credit card is a matter of knowing what you want in a card and why those features are important to you, and then going out and finding a card that meets as many of the points on your wish list as possible. Choosing a credit card also involves a little know how as far as knowing what types of companies and features that you want to stay away from.
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Steps to choosing a credit card
- Why do you want a card? - Do you want a card so that you can have more money at your disposal? Do you want a card to look cool in front of your friends? Do you want a card to build your credit? The way that you answer these and other questions about credit cards will be the largest determining factors in choosing a credit card that is right for you.
- Credit limit - The credit limit that you will have on your card is a reflection of the amount of money that the credit giver trusts you with. While having a large credit limit is a reflection on your credit worthiness, it is also a great responsibility in terms of exercising self control and not spending more than you are able to promptly repay. Many first time credit card owners will start off with a low credit limit and then as you prove that you can make payments on time, you can request that the limit be raised.
- Improve credit score - Many people apply for a credit card as a way of improving their credit score. Having several well managed and responsibly handled credit accounts raised your credit score. But a word of caution, there are some credit cards that are actually bad for your credit even if you always pay your bill on time. These credit companies have a unique way of reporting your credit to the credit bureaus that reflects poorly on you. Instead of stating what your balance is in terms of the limit that you have on the card, they report the balance as the limit making it look like you "max out" your card every time you use it. Pay close attention and be sure that if you are concerned about your credit score that you stay away from cards like these.
- Emergencies - Many people do not like the idea of spending money that is not their own, but would rather have a credit card just in case of emergencies. In this case you will want to look for a card that has a limit that you think would be sufficient for the types of emergencies that you would encounter. Lifestyle, place of residence and the size of your family are just a few factors that you would want to consider when looking at credit card limits. Annual fees should also be a consideration.
- Low interest rate - If you are not sure that you will always be able to pay off the balance of your card every month, you need to look for a card that will offer an interest rate that is low.
- Rewards - Many cards offer rewards such as cash back, flyer miles, etc. in exchange for a slightly higher interest rate. If you are good at re-paying your debt these really can be rewards. If you end up paying interest charges, you may want to consider if the rewards being offered are actually worth paying interest for.
