What To Consider When Choosing a Credit Card
Credit cards are an incredibly helpful tool. They’re easier to carry than cash, make the check-out process super quick, offer rewards and incentive programs¦ the list goes on and on. That said, it’s important to remember that credit cards are not one size fits all. Depending on your financial habits, certain aspects of a credit card might be of greater value to you than others.
So, to help you make the right decision when choosing a card, here are some things you should take note of:
1. How Are You Going to Use the Card?
The first step you should always take before getting a credit card is to ask yourself what am I getting this for? Is it so you can start building credit? Are you going to use it to finance expenses? Are you looking to capitalize on a miles or other rewards program? Cards are typically designed to suit a particular spending habit or goal so determining what it is you would want out of a card will be a huge help in narrowing down your selection.
2. What are the Interest Rate?
A cards interest rate is typically represented by APR, otherwise known as the annual percentage rate. This is essentially how much interest you’ll be charged should you decide to carry a balance on your card from month to month. In addition to checking the percentage, you’ll want to know whether the interest is a fixed or varying rate. Varying rates will typically be tied to some sort of financial indicator (like the prime rate) while fixed rates are set at a specific number. Of course, even a fixed rate is subject to change depending upon how the card is being used. Rates can be affected by penalties, cash advances, and promotional periods (such as an introductory rate), so be sure to take those numbers into account as well.
3. Is There a Grace Period?
Your grace period will be the time between making a purchases and when you start accruing interest. Some of the better cards out there will offer you somewhere around twenty days before they start charging interest. So if you’re the forgetful type, or simply like hedging your bet in the event of an unexpected emergency, it’s in your best interest to prioritize cards that offer a good grace period.
4. Is There an Annual Fee?
Depending on which card you select, you may be required to pay an annual fee on top of your monthly payments. This is usually reserved for cards that offer premium rewards and perks. These are typically higher return percentages on rewards programs (you’ll earn 3% cash back instead of 1%) and more miles for travel cards. If you’re considering a card that has an annual fee, you should make sure the value of it’s rewards will outweigh it’s cost. More often than not, a card with an annual fee is worth it if you have a large purchasing power, so if you’re not planning to make a lot of purchases with your card, it might be in your best interest to avoid them.
Most important of all is making sure the card you choose fits your specific lifestyle and caters to your financial needs. Take your time when choosing a card, and make sure to do your research when determining which creditor offers the best deal.