Choosing Good Credit Cards

There are a wide variety of credit cards out there. You might have received offers from some of them in your mail. How can you determine which one is right for you? The sheer number of different types of credit cards, with all their variables, can make that decision a bit overwhelming. Should you get one with lots of rewards, or look for the lowest APR? Before you sign up for the credit card offer that arrived in your mailbox today, read this. It will help you find out how to choose a credit card that is right for you.

First, figure out why you think you need a credit card. What are you planning on using it for? Discovering the answer to that question will help you narrow down what category of credit card might be the most useful to you. Are you planning on consolidating several different credit card balances onto one card? Then you should look for a card that offers 0% APR on balance transfers. Did you want your purchases to earn you some airline miles? If your job requires you to travel by airplane, you might need a business, or professional credit card. If you are simply hoping to cut some costs on the next family trip, you might get more use from a rewards card or an airline miles card. Are you a person who has no credit history, and you want to begin building it? Then you might need a pre-approved, or a pre-paid credit card. It all depends on the purpose you intend to use the credit card for.

Next, find out if your credit rating is high, low, or somewhere in the middle. The best way to learn this is to get a copy of your credit report. Your credit score will be on you credit report, and there often is an explanation of how high or low your score is considered to be. Some cards are going to require applicants to have excellent credit. Other cards will accept people with low credit scores, and those who have yet to establish a credit history. Once you know how good your credit is, you can “weed out” the cards that require credit that is better than yours currently is. If you have excellent credit, you can search for the credit card with the best options.

Lastly, go online and do some research. Find out what is out there before you apply for the card. Here is a quick guide to some of the main features you will see with credit cards.

What is the APR?
Each credit card will have an APR. It stands for Annual Percentage Rate. It is the interest rate that is charged on credit card balances each month. The rate is applied if you have an outstanding balance. Pay off the entire bill every month on time, and you won't have an interest rate added on to your bill.

It is important to find out what the APR is on the credit card offer you are considering. In general, the lower the APR the better the card is for the consumer. If you pick a credit card that has an interest rate that is too high to comfortably fit into your budget, you are going to run into difficulties with paying down the balance on the card each month. This will cause your debt to grow.

Is the initial APR temporary?
Sometimes, a credit card company will make you an offer on a card that has a low percentage rate, (or zero percentage rate) at first. Before you sign on the dotted line, check to see if that lovely low rate is here to stay, or if it is only for a limited time. How high is the APR going to jump to in a few months? That is the rate to focus on, not the nice, low, one that is designed to attract new customers. If you can't pay the “real” interest rate, you will have problems with credit card debt.

What is the credit limit?
The credit limit is the maximum amount that a credit card company will let you charge on your credit card. Typically, a brand new card will start with a modest credit limit. Sometimes, credit card companies will periodically raise the credit limit for good customers.

Should you look for a high credit limit, or a low one? That depends. If you are intending to use the card specifically to make a purchase of a big ticket item, (such as a refrigerator, dishwasher, or washer and dryer), you will need a card that gives you enough credit limit to allow for that. If you are intending to use the credit card on small purchases, to build a credit history, then you will do fine with a lower credit limit.

What about the "perks"?
Some credit cards will come with special deals and offers. These are the very last things to consider when comparing credit cards. First, find at least one or two cards that have a nice APR, and a credit limit that fits your needs.

After that, you can see if the card offers "points" for shopping, or frequent flyer miles, or other "perks". The special stuff is extra. It may sound more exciting than the APR or credit limit, but it is the least important factor to be concerned with when comparing credit cards.