Credit Card Basics: How to Choose the Right Card

by Ryan Yates

Choosing the right card takes strategy

Are you in the market for a new credit card? Do you feel like upgrading your perks, miles, or rewards?

Are you thinking about the cashback bonuses that come with using a credit card instead of a debit card?

Before you sign the paperwork, realize that the credit card with the brightest bells and the loudest whistles might not be the right credit card for you.

To help you with your credit card homework, we’ve given you a few useful study tips.

Fair Warning

The double edge of a credit card can pierce through your monthly budget and into your emergency fund and college savings.

It can be your most powerful tool or your most lethal enemy. And the deciding factor is you – even the credit cards packed with the most rewards and highest cashback bonus rates can’t help you if you can’t control your spending.

Two-income American households maintain a staggering average credit card debt of $10,700. So be warned, before you use a credit card, you need to master the psychology of spending within your means.

Approaching the Decision

As you prepare to begin your credit card search, make sure that you’re in the right frame of mind.

Understand that choosing and using a credit card is a very important decision. Don’t just base your choice on the best rewards or the funniest spokesman. (I know that sounds silly, but there’s a reason why credit card companies use celebrities to pitch their products.)

You should also plan on using your card for an extended period of time; we’re talking years here, not weeks or months. It’s not a good idea to change credit cards every 6 months or whenever the winds of rewards change direction.

Too many credit cards gives you too many chances to over spend and max out. Plus, no one needs too many pings on their credit report.

General Guidelines

No matter which credit card you’re thinking about, start sorting through the mess with these general guidelines.

APR – Make sure you’re looking at cards that offer 12% fixed interest or lower. Don’t be sucked into a high fixed APR with a low introductory offer.

Alternate UsesBalance transfers and cash advances are a part of the credit game. If you need to use these features, be sure to choose a card with low transfer rates and reasonable cash advance terms.

Fees and Penalties – When researching cards, make sure to read the fine print about annual fees, non-usage fees, and penalty charges. There should be no problem finding a great card with zero annual fee.

Choosing the Right Card

It’s extremely important that you choose a credit card that will fit your lifestyle and your monthly budget strategy.

Revolving Balance – If you plan on keeping a credit card balance that rolls over every month, you’ll want to focus your attention on cards that offer low fixed interest rates, low balance transfer rates, and minimal penalties for low spending.

Monthly Balance Pay-Off – If you’re at the point in your financial journey where you pay off your credit card balance every month, you’ll want to find a card with no annual fee and a solid miles, rewards, or bonus program that’s actually worth your time and spending.

Specific Needs – If you spend more on gas each month than anything else, research gas cards that offer the biggest rewards on your gas purchases. If you travel, look for a card that rewards you with flights and hotels. However, avoid a credit card collection for every interest in your life.

If you can channel the power of responsibility, credit cards can be a useful tool in your financial arsenal.

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