Credit cards can be a wonderful asset when used properly and chosen carefully. Without following some sensible rules, however, they can be destructive to your life and your credit score.
So it’s imperative that you make the decision about which card to get wisely and utilize the card properly. In order to make the most out of your credit card, you should take these six things into account.
1. How will you use the card?
The way you intend to use the card will play a huge role in what card you should get. For instance, will you be paying the balance off every month or will you have a balance that carries over? Is the card something you will use often or will it sit in your wallet for emergency use?
Paying off the balance or carrying it over will determine how you choose an interest rate. How often the card will be used should determine what type of limit and rewards program you go for. The less you use the card, the less you need from it including fees.
2. What is the interest rate on the card?
This is a key factor in choosing a credit card for most people. Unless you plan to never carry a balance you will have to pay interest. So it’s vital that you keep up with what your interest is. It’s also important to know if it’s variable (changing regularly) or fixed (can change but not as often).
3. What is the credit limit on the card?
You will never want to max out your card. You don’t want your limit to be cut to less than what your balance is. Both of these will hurt your credit score terribly. So it’s important when choosing a card to know the limit. The better your score, the higher your limit may be.
4. What are the fees and penalties for the card?
Issuers make quite a bit of money charging for everything from balance transfers to a request for a limit increase. So it’s vital that you read the fine print and choose a card with minimal fees. And be cautious of the penalties. You don’t want to pay more than you already have to.
5. How does the issuer determine the finance charge?
Commonly it is to add the daily balances and divide by the days in the billing cycle. However some issuers will use more than one billing cycle and this costs you more. Steer clear of these cards.
6. What incentives does the card offer?
If you plan to use the card anyway then getting something extra is a great benefit. But you want to find one that offers rewards you will actually use. So check out the incentives on all cards before making a choice.
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