Choosing The Right Credit Card

With hundreds of different credit cards available to consumers, it is often difficult to determine which credit card is best for you. Here are some criteria that will help you decide.

Getting Accepted

One of the first criteria of finding the right credit card is determining whether or not you will be accepted to their program. Unfortunately, it is near impossible to know for sure without applying, but applying for too many cards can actually bring down your credit score.

The best advice one can take in this situation is to use a little common sense. If you have poor credit or unestablished credit, you cannot expect to be accepted by a credit card offering the best interest rate or the best incentives.

Credit Card Incentives

Many credit cards offer incentives such as frequent flier miles, free gas, or cash back. However, these credit cards also usually carry higher interest rates and charge yearly fee. A general rule of thumb is that if you are not planning on paying off the entire balance every month, an incentive credit card probably is not the best option for you. You also have to make sure that any benefit that you do receive is worth more than the credit card's yearly membership fee!

Credit Card Interest Rate

Ideally, you would never carry a credit card balance and not have to worry about the interest rate. If you are able to do this, you do not need to worry about the interest rate because the rate is only applied to money that is carried over from month to month.

If you are not able to pay off the entire balance every month, you need to focus on the interest rate over anything else. Credit card debt is very expensive and you can find rates anywhere between 0-25%. If you carry the average $8,500 in credit card debt, this can be the difference between paying $0 and $2,215 per year!

Credit Card Yearly Fees

Many credit cards now charge yearly fees for the privledge of using their cards. The fees can range anywhere between $25 and $200. When choosing a card, it is very important to consider how much the fee is, especially if you are choosing the card based on incentives. Often times, the yearly fee is higher than the value of the incentive you receive!

Penalties

If you are occasionally late making your monthly payments, the penalty fees that the credit card charges will creep up on you. Make sure you understand all the different situations where a penalty fee may be charged. This is one of the major differences between many credit cards. If you plan to play by the rules, the penalty fees are probably not that important.

Conclusion

Credit cards are a great way to build your credit score, but they can also be very dangerous. Finding the right credit card may be the difference between profiting from your credit card use, and paying through the nose from the interest rates and yearly fees.