Which Card is Right for You?
Posted by Gail | Filed under Credit Wise
With b’zillions of credit cards out there to choose from, how do you decide the card that’s right for you. Well, it boils down to what you’re trying to achieve.
Are you carrying a balance and trying to pay off debt? A low-interest credit card can help. Look for one that offers low interest on balance transfers. Then put the card away so you don’t use it for purchases. Make sure you know exactly how long the low interest rate will last, and make a plan to have the balance paid off by then since introductory rates have a way of shooting up after the first 6 or 12 months. Read the fine print on the application and on your credit card agreement.
Are you trying to establish or re-establish a credit history? If you’re new to the country, or you’ve been through bankruptcy, you’ll want to get your hands on some credit so you can establish a credit record. Get yourself a secured credit card. You have to put some money on deposit with the credit card company to get the card. Usually if you want to have a $500 credit limit, you have to put up $1000 as security. Almost anyone who is able to put of the required cash as collateral can qualify for one of these, so it is a great option for anyone who wants to build or re-build a good credit history.
Do you pay your balance off in full every month? There are loads of options open to you. From cash-back credit cards to cards that give you points for groceries or travel, the credit card world is your oyster.
Do you charge lotsnlotsa stuff? For people who rack up expenses that are then reimbursed, a cash-back card can be a very smart move. Some cash-back cards offer an annual cash rebate that equals a percentage of the previous year’s purchases. Some offer cash back along with other rewards as well like airline miles, gas rewards, investment products, and even charitable donations. Most come with an annual fee so before you jump on the bandwagon, make sure you’ll charge enough to warrant the fee if there is one.
Don’t charge enough to warrant the fee on a cash-back card? Reward cards give you points instead of dollars. The thing to watch for with most cash-back and reward cards is the interest rate being charged. Most of these cards have pretty hefty interest rates, so if you’re carrying any balance at all the interest costs will gobble up any benefit you would derive from the points.
Do a lot of travelling? Airline cards can help you rack up free travel to compensate for all that time you have to spend away from the hubster and kidlies. Many come with an annual fee. Virtually all have a whopping interest rate. These cards only work if you do not carry a balance.
Do you run your own business? In all likelihood you’ll have to sign personally for your credit card. The upside is that if you buy a lot of stuff using the card and earn points on that stuff, you’ll rack up points (or cash back) in no time flat. Again, watch for fees. It’s amazing how the price goes up on credit cards/bank accounts when they attach the word “business” to the account. And be aware that if the card is touted to act like a line of credit, you’ll likely lose the grace period, so interest will start accruing on your purchases the minute you make them.
Are you a student? While some credit card companies say they offer “student” cards, these are often just their regular cards repackaged.
The credit card world if vast. Choose wisely and use your credit card smartly, and you can put those suckers to work for you instead of the other way around.