Choosing the right credit card is like choosing the right clothes – not everything is going to fit everyone.
The best way to choose the right credit card for you is to do an inventory of your credit, spending and financial history.
Here are some tips to help get you started, along with suggestions about the type of credit card that will best fit your situation.
1. Assess your credit score
This will determine the likelihood of you getting the best interest rates available for credit cards.
If you have good to excellent credit, then you can expect to pay as little as 7 percent APR for the most competitive cards out there. By contrast, interest rates for those with poor to fair credit my run upward of 20 percent or more.
If your credit score is low, work to improve it by committing to making on-time payments and challenging any inaccuracies on your credit report.
2. Analyze your spending habits
If you are someone who uses credit frequently, maybe a card that offers rewards or even cash back on those purchases would be best for you.
Some cards have a rotating cash-back list that can reward you up to 5 percent for things like gas, groceries, entertainment or even dining out.
“When used wisely, a credit card
can be used to your advantage.”
3. Take a look at your financial patterns
Do you tend to carry a balance on your credit card each month? If so, the lowest interest rate cards will be better for you.
It also may be worth your while to find a card with a low or zero-interest introductory rate, to help you pay down your debt quicker.
However, keep in mind the interest rate will rise after the introductory period, so pay close attention to what it will be when that happens.
4. Review your financial history
When choosing the right credit card to fit your lifestyle, credit history and spending habits, it also may be a good time to review your complete financial situation.
Take a close look at your debt to income ratio. If you’re spending above your means, make a plan to cut back. Using a credit card wisely can be a part of this plan.
By reducing what you pay in interest charges, never paying an annual fee and taking best advantage of introductory rates to pay down debt, you can end up paying less on your credit spending than you currently are.
By choosing the credit card that fits your spending habits, you can actually improve your financial situation. Be aware of the options available to you — it’s the best way to begin making good credit decisions.
When used wisely, a credit card is a powerful and convenient part of any successful financial plan. Good luck!
Photo source: manilla.com.
Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.