How To Choose a Credit Card

Decisions, Decisions

Choosing a credit card can be a daunting task for almost anyone. There are so many different kinds out there, all with different terms and conditions, it seems like you need a financial planner to make an informed decision. In reality though, you can cut through a lot of that fine print buy just focusing on the most important characteristics of each available credit card. In this article, we'll go over what to focus on when making the decision of who to trust with your credit.

First Things First: Fees and Service Charges

There are some cards out there that will charge you application fees. In this day and age, when banks are trying to squeeze every last penny out of their customers, it's no surprise that these charges have reared their faces once again. Before you decide to bite the bullet and put up your hard earned cash, however, consider if you really need to subject yourself to it. There are a myriad of companies out there who will gladly review your credit and give you a yes or no answer without any out of pocket expense to you.

Even if you find a card that doesn't cost you anything to apply for, there can be other hidden service charges that you have to keep an eye out for. These include such tacked on fees such as membership dues or annual fees. While there are plenty of cards that follow these practices and in return provide you a higher level of service, there are others that don't really give you anything back for your expense. When considering a card, make sure to keep an eye out for these charges, and if you find them, don't automatically dismiss the application unless it's obvious you don't want to pay the extra amount.

Interest Rates

In a perfect world, everyone would pay off their full balance each month, and move on from there. Unfortunately, the reality is that many simply can't afford to do this, whether it be because of poor planning or life throwing us a curveball in the form of a job layoff, a medical expense, or something else. If you believe you're at risk of being one of these individuals, you owe it to yourself to find a card with low interest rates. Over the lifetime of your account, that alone can mean the difference of thousands of dollars. Even if it means an annual fee of fifty dollars or more, do the math, and you can see how you may come out on top. Of course, regardless of which credit card you do pick, do your very best to eliminate unnecessary expenses so that you can pay off your full balance each month.

Limits

For some people, a high limit on their credit card is important. If you're the type who needs to be able to spend a lot of money in a given month, then certainly you'll want to inquire about having this available. For individuals who have many years of great credit, it's easy to get a big limit and not have to worry about being cut off. In fact, if you've got a credit card that gives your rewards or bonuses based on the amount of money you spend, a higher limit is an even greater way to get a huge return when you make those big purchases.

On the other end of the spectrum are cards with minimal limits, such as five hundred or a thousand dollars. These are often offered to individuals with no credit history, and unfortunately are a necessary evil for building up your credit score until you can have better benefits available to you. Consider all these criteria when it comes time for you to choose your next credit card.