How to Choose a Credit Card
A credit card can be quite handy but it can cause damage if it is used irresponsibly. This means that you need to choose the right credit card for what you need it for.
There are some factors that you need to look at when you choose a credit card.
You need to first determine how you will be choosing your credit card. Are you the type of person that will pay their credit card in full every month or do you think you will be carrying a balance month to month? Will you be using a credit card for only emergencies or for everything?
If you are going to pay your bill in full every month then the interest rate will not play a part. It is a good idea to look for a credit card that has no annual fee and a long grace period so that you do not get charged a finance charge.
If you believe you will be carrying a balance then you will want to get a credit card that has a low interest rate and a low introductory rate.
If you plan on using your credit card to pay for most things then you will need one with a good credit limit and a rewards program that you can take advantage of.
If you are solely using a credit card for emergencies then you need a credit card that doesn’t have any extras and low fees and interest rate.
The interest rate will appear as the APR. This will either be fixed or variable.
A fixed rate will mean that you know what you will be paying each month unlike a variable rate that will fluctuate.
Your credit limit is the amount that your credit card issuer is willing to let you borrow. The limit you receive will depend on your credit history.
Fees and Penalties
Credit card issuers will charge fees and the common fees include balance transfer fees, cash advances fees, a fee to increase your credit limit and other such fees.
If you pay your bill late then you can incur a late penalty fee. If you go over your limit you will need to pay a penalty.
You will then need to find a credit card that has reasonable fees or ones that offer promotional periods like 0 interest for the first 12 months.
Also make sure that you will not being paying extra for rewards programs.
Balance Computation Method
If you know that you will be carrying a balance month to month then you will need to understand how the finance charge is calculated.
A common method is where the daily balance are added together and then divided by the number of days in the billing cycle.
You should stay away from credit cards that calculate using two billing cycles, as this will cost you more in fees.
There are reward programs on offer. These can be nice extras if you know you will be making the purchase anyway and the credit card issuer does not charge for their rewards programs.
Find programs that have flexible rewards and ones that you will actually use.