When the topic of credit cards comes up, you’re probably used to hearing only the bad things. But, in reality, for most of us credit cards have done us a valuable service: helped us establish a credit history. Let’s be honest, few banks are going to hand out money for a big ticket purchase to someone who has never demonstrated responsible credit usage before.
Of course, just because credit card can be useful that doesn’t mean you should choose the first offer you get in the mail. You need to be selective because you really only want one or two at most. If you have more than that, you are going to be running the risk of getting into a serious debt situation that will only hurt your long-term credit history and defeat the purpose in the first place. Below are a few tips that can help you make the right choice when selecting a credit card.
- Look at the interest rates – Rates vary a great deal so always flip over the offer and read the small print in the box on the back. Obviously, lower rates are going to be better but you want to read the fine print, too. Many of the cards start you out at very low interest rates only to increase the rates after the first few months. You may also only be eligible for the low interest rate if you transfer balances. Pay attention to how much the interest rate will increase if you are late on a payment.
- Look at grace periods – The grace period is the amount of time between when a purchase is made on the card and when interest begins accruing on that amount. Longer grace periods mean you have a bigger window in which to pay off the purchases without owing any extra interest. That’s a good thing. However, credit card companies have been shrinking that window in recent years. While it was once almost always 30 or 31 days, today some companies have lowered it to around 25 days or less.
- Check the reputation of the company – Always learn more about the company offering you the credit card company. Some have some nasty reputations for playing games with customers when it comes to interest rates and payments. Read what other people are saying. If nothing else, apply for a credit card directly through your bank or credit union.
- Know about annual fees – Some credit cards do charge annual fees to their customers. The fees vary greatly but they are always paid through your actual credit card which means you could end up paying interest on that fee, too. Your best bet is to find a card that does not charge any fee. Unless you already have bad credit, you should be able to find a company that will offer you a credit card with no annual fee. Also don’t fall for other charges, such as processing fees.
Remember that having a credit card can be very useful but making the right choice and using it responsibly will determine whether you made a wise decision or not.
