SmartHomeOwners

When considering a credit card you should really think about why you want or need a credit card and how you intend to use it.  Getting a credit card without a plan is like throwing your money to the wind and hoping it will come back to you!  Don't leave your credit card selection to chance.  These easy tips can help you make a wise decision based on your financial situation.

How Will You Use the Credit Card?

Consider how you plan to use the credit card before signing on with any particular company.  Will you use it for emergencies only (car trouble, medical emergencies, urgent home repair needs, etc.)?  If so, find a credit card with a low interest rate, low fees, and a decent credit limit.  If you plan to use the card for monthly spending and will pay the balance in full each month, then the interest rate is irrelevant.  In this case, you should sign on for a credit card that has no annual fee and the longest grace period possible. 

For credit cards that are meant to carry an ongoing balance, take time to compare introductory and long-term interest rates.  If you plan to use the card frequently throughout the month, look for a card with a solid rewards program.

Understand Credit Card Interest

Many consumers are confused about credit card interest.  To find out the interest rate, look for "APR" which means "annual percentage rate" when reading the credit card terms.  This may be a variable or fixed rate.  A fixed APR is one that will not change for the duration of your credit card usage.  A variable APR is one that can increase or decrease over time.  Some credit card issuers offer a very low introductory rate to attract new users, and then up the interest rate after a set time period (usually within a few months or a year).  Many credit cards enable you to avoid paying the interest rates as long as you pay off your balance within a given grace period after making a purchase.  This might be anywhere from 25 to 35 days.  This doesn't mean you'll avoid fees, however, so beware of any additional fees that might be charged with each purchase.

Establishing a Credit Limit

The credit limit is a spending limit, or how much you can actually charge to the card.  It is how much the issuer will allow you to borrow.  Just as any type of loan, this is usually based on your credit score and history, income and employment stability, and other factors.  If you are unable to get approved for a regular credit card due to poor credit or a lack of revolving credit, then consider getting a secured credit card.  A secured card is guaranteed by a certain dollar amount that you must deposit into an account.  As you use the card, your balance is depleted and you must replenish it to keep the card.  Secured cards do sometimes carry high usage fees and are not meant for a long-term solution, but a secured credit card can act as a stepping stone to obtain a regular credit card later as well as build a higher credit score.

Credit Card Rewards

Rewards or incentives are often provided for frequent credit card use. These can be rewards for grocery shopping, buying at certain online venues, fuel, air travel, hotel room rental, etc.  The more often you use the card for certain purchases, then the more rewards you'll receive toward future purchases.  When seeking a credit card with rewards, consider the type of rewards being offered, how soon they will expire, and how many total points can be earned.  Some rewards cards are well worth the effort while others are not worth it.  You'll need to consider the interest rate of these cards and any annual fees before signing on.

Credit cards provide a convenient way to make purchases, travel, dine, buy fuel for your vehicle, and fund other activities.  They can also help you easily keep a monthly budget when used wisely.  Consider these tips when shopping around for the best credit card.