Choosing a credit card can be a daunting task. It seems that every organization from banks and financial institutions, to airlines and coffee shops all offer credit cards with benefits to you the consumer. It is little wonder than so many people become flummoxed when figuring out how to choose a credit card. Before choosing a credit card here is a word of warning to begin with.
If you see a credit card vendor at the airport, or in a shopping mall do not be tempted to sign up there and then on the spot. Sometimes the vendors can be quite pushy, tempting you with all manner of introductory offers. The temporary staff manning these booths are on a commission for everyone that they sign up. By all means take the information for your own research, but do it sign your life away right away as you will most likely end up with a product that is not suitable to your needs.
The first thing you must do is to know your FICO credit score. If you have a high score then you will have wide choice of cards. If you have a low score, you will have a narrow choice, and you may want to ask yourself if you should be looking for a credit card and adding to your potential to get into debt and thus further damaging your credit. If you have a low score, but need a credit card to rent cars or book hotels you can apply for a card from a range of credit builder cards. You will have a very low line of credit and the interest rate for carrying a balance will be very high. When choosing a credit card first assess your own needs and lifestyle. Ask youself questions like.
- Why do I need a credit card?
- Am I likely to carry a balance each month or pay it off completely
- Do I find myself frequently flying a particular airline, or using a business service that offers a credit card.
- Will I use this card for everyday purchases, large ticket items and unusual situations, or just to cover emergencies? These types of questions will lead you towards choosing the right card for you.
Question 1 is important because it may be possible that you do not need a credit card at all. You may already have one that you don’t use, or maybe your lifestyle is such that you are able to pay for everything you need with cash, or a debit card. If you are the kind of person that buys on impulse and could easily run up a debt, then you may really need to assess whether or not you should be applying for a credit card at all.
If you are the type of person that carries a balance each month then there are two things to consider.
- The interest rate. You will want to make sure that that is as low as possible, and
- Can you transfer an existing balance for a period of no or low interest.
If you don’t ever carry a balance then you should look at how the credit card can serve you better. Does it come with cash back options? If you fly to a destination regularly or find yourself on a particular airline, then a card that offers frequent flyer points may be of use to you. If you go to a coffee shop or grocery store that offers discounts or coupons for using their credit card, you could save money.
You can get a card from a car manufacturer in which you can save up points that can be put towards the purchase of a new car. The right choice for you will depend upon your personal lifestyle. If you pay off your card on time then the rate of interest is less of an issue, however if you end up with two or more choices that will benefit you equally then go with the one that offers lower interest just in case you accidentally miss a payment, or make an emergency purchase that you can’t pay off right away.
If you are using the card for everyday purchases then a good option is to have a card that is linked to your regular bank so you can manage all your finances in one place. If your bank doesn’t offer you a good option for you, then look for a card that is easy to manage online. You’ll want to be able to make payments easily and check your balance regularly.
If you only use your card for big-ticket items then the line of credit offered and the interest rate will be important. Look at what types of guarantees and warrantees the credit card offers on top of what the manufacturer provides as this could be a factor in choosing a credit card. You should also consider other options such as personal loans for such purchases as you may get a better deal if you are looking to finance a purchase using a credit card.
If you are the kind of person that will only use a credit card for emergencies and services where you need a card, such as hotel check in and rental cars then almost any card will suffice. Bear in mind you may have to make a purchase once in a while or you may find that your card is cancelled.If you rent cars then also look into cards that offer car rental insurance as this could save you money also as you won’t have to pay the expensive insurance charges, which can often double to cost of a car rental.
There are many things to consider when figuring out how to choose a credit card. Taking the time to research you financial needs, and how credit fits your lifestyle will help you choose the right credit card for you.