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Choosing a Credit Card

By Richard Greenwood

Republish: EasyPublish™
Published: 06Jul2008
Word count: 544
Viewed: 270 time(s)

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Credit cards are complex items, and the best credit card for you may not be the best one for your neighbor or friend. When you compare credit cards, there are a lot of factors to consider, but the most important thing is the factor that's most important to you.

Credit cards come with a variety of interest rates, fees, introductory rates, penalty charges, and "bonus" items like cash back, insurance, or air miles. When you compare credit cards, you'll want to look closely at the ones that offer the biggest advantage in the area that's most important to you.

For instance, if you plan to carry a balance even for a few months on your new credit card, you'll want to look for cards that offer low ongoing interest rates. Some cards will advertise an introductory, or "teaser" rate, but after the introductory time period is over the default interest rate will take over. That rate may be quite high, but you won't know that unless you read the credit card agreement — which is something you should do before you decide if this is the card for you.

Maybe the best credit card for you is one that offers air miles. If you'll be paying your card off every month, that may be true. But be aware that most cards offering rewards, whether that's air miles, purchase insurance, cash back, or other items, often charge higher fees and interest rates. You may see a fee to obtain the credit card, an annual fee, and very high interest rates if you do not pay the card in full each month. Add up the charges and you're likely to find that the "free" air miles are actually pretty expensive.

Once you've determined the factors most important to you, search for the range of products that meet your needs using a credit card comparison website. You can compare cards by class—for instance, Standard or Classic cards, Gold cards, or Platinum cards. Consider which card to apply for using this method. For instance, if this is your first credit card or you're early in your career with a beginning salary, a Standard or Classic card is probably your best idea. Some of the "premium" cards have higher approval requirements, and if you have no previously established credit, you're unlikely to meet those requirements. If you apply for credit and are denied, your credit score will take a significant hit that will remain for several months.

However, if you charge quite a bit every month and pay the balance in full, a card that offers rewards like purchase insurance or cash back may be a better offer for you. So long as the rewards are important to you and they eclipse any fees you pay for the privilege of tucking that card in your wallet, then consider a rewards card. The key when comparing credit cards is to find the best credit card for you based on your planned use of the card, your credit history, and what "extras" you're looking for. Take your time comparing and selecting a card, and you'll have one that will fit your needs for a long time to come.

Author Richard Greenwood writes on a wide range of personal finance topics. He is Director of the Click 4 Group which runs financial comparison sites to compare credit cards and high interest savings products

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