How to Choose a Credit Card

Posted on April 21st, 2009 by Carmelia

(No Ratings Yet)

Loading ...

No Comments (Post Comment)

Republish

You may be getting a lot of credit card offers in the mail, and while it may be tempting to just jump into one of these offers, think again. Choosing a credit card carefully is choosing how to spend your money wisely as well. Here are the factors that you need to think about first before getting the right credit card for you.

Types of Credit Cards

Knowing the types of credit cards and their unique features can help you in choosing which one suits your lifestyle the best. Here are the different types of credit cards:

Standard Credit Card. Revolving balance with a set credit limit. Finance charges to outstanding balance at the end of the month. Finance charges are added to outstanding balances monthly. Minimum payment monthly to avoid penalties for late payments.

credit cards

Premium Credit Card. Has the same functions as a standard credit card, and usually comes with a higher credit limit. The main different lies with the greater rewards and points that comes with the card.
Charge Cards. Charge cards have no credit limit and allow you to charge up to whatever amount, but the full amount must be paid at the end of the month.
Limited Purpose Cards. Credit cards that can be used only in specific locations, with a fixed finance charges and credit limit.
Prepaid Credit Card. As the name implies, you must “load” these cards before you get to use them. The card is only as useful as the amount you put in.
Business Credit Card. These credit cards were made specifically to cater to businesses and to give business owners to transact separate from their personal credit card.

You can also go to the official CNN website’s CNN Money page and make use of their card search tool. Using your preferences, the site will then enumerate the best choices for you.

Credit Card Usage

There are different types of credit card, each with their own pros and cons. Try to view how realistically you can pay for your credit card bills and study your spending pattern when settling for a type of credit card. You should also consider the following features in a card, which include:

Payment. Are you the type to pay in full or if you are the type who wishes to carry over their balance to the next month? If the former, get a charge card. If the latter, try to find a credit card who has a low interest rate on balance transfers.
Annual Percentage Rate (APR). The APR is the percentage applied to balances that are carried over past the grace period of paying. The higher the finance charge, the higher the APR.
Grace Period. The grace period is the time given you to pay your card balance in full before the finance charge is added. Of course, a longer grace period is always better, since you don’t have to worry about finance charges adding up in in short amounts of time.
Credit Limit. How credit limit is fixed depends on each card company. It’s usually wiser to have a low credit limit if you are a new card owner, and increase it as you become more responsible with how you use your credit card.
Finance Charges. Consider how the finance charges are calculated. Some cards base the finance charge on a fixed percentage rate on your outstanding balance, which include the last months’ balances and the current month’s balance. The lower the finance charge, the better.

Credit Card Rewards

Rewards are also something you should consider when choosing a credit card. These rewards come with how much you use your credit cards. Sometimes a point system is also used. Your credit card rewards can include: