Our regular readers know how much I dislike credit cards. Actually, dislike is a really weak attempt at describing how I really feel. Still, there are tons of people who disagree with me and feel they just can’t get by without a credit card. So I figured if you’re going to ignore my advice to stay away from credit cards, I might as well give some tips on finding a good one.
How to Shop for a Credit Card
One of the reasons credit cards are so popular is the shear convenience. That’s also what can get you in trouble. Convenience is nice, but you almost always pay more for the convenience. If you are in the market for a credit card, it’s not always a good idea to choose the first credit card company that sends you an advertisement in the mail. Instead, doing some careful shopping around could provide you with the information that you need to make a decision. If you’re shopping for a card (and I hope you’re not), here are a few things to look for:
During the process of shopping for a credit card, you’ll probably want to know what kind of interest rate you’re signing up for. If you’re one of the somewhat rare minority that actually pays off their credit card balance every month, the interest rate may not matter much to you. It’s still a good idea to find a credit card with low interest for when life happens and gets in the way of your well-intentioned plans. If you only buy things on your card that you can pay off that month, you’re probably going to be ok. Unfortunately, too many people fall into the trap of carrying a balance and paying interest.
If you have an existing balance on credit cards, you may want a card that has a low introductory interest rate so you can transfer balances from other cards on to the new card. It’s also important to determine the different types of interest rates associated with the card. Sometimes the rate you think is the permanent rate of the credit card is actually only an introductory rate. And don’t forget, if you don’t change your money management behaviors that caused you to build up a credit card balance in the first place, you’re very likely to wind up in the same spot, only with more debt on the new credit card.
When shopping for a card, a lot of people like to pay special attention to the type of rewards program available with the card. Most credit cards have some kind of rewards program that you can take advantage of. The logic for most people is if you’re planning on making a lot of purchases on your card anyway, you might as well get something back for all of your spending.
Some cards will give you one point for every dollar that you spend on the account. Others will net you double or triple points for every dollar. Some give you more points for purchases in certain categories as well. Find a card that offers the best deal on rewards points for the types of purchases that you plan on making the most.
But be very careful with this approach. Many people get in the habit of buying things on their rewards cards just so they can build up their rewards points or perks. The problem is you’re spending money so you can save a few percentage points. It’s like spending $100 to save $5. Why not avoid spending the $100 and put $5 in your savings account? You’ll come out $95 further ahead than you did with the rewards points.
There are plenty of credit card comparison websites out there that will allow you to narrow down your options to the cards that offer what you need. These sites help you easily compare one card against another to see which one is the best for your individual situation. At that point, you can apply for the card and start being happy.
I’m in no way endorsing the use of credit cards as a savvy way to win financially. I’m perfectly fine living without credit cards and I strongly believe that I am much farther ahead because I don’t have credit cards. If you disagree with me and really want o get one anyway, that’s fine. At least take the time to make sure that the card you choose is the best one for you and know what you’re signing up for. What the big print giveth, the small print taketh away.