Choosing The Right Credit Card

They come day after day after day. Sometimes two, three, or four at a time. Credit card offers. The credit card industry is highly competitive and banks and other financial institutions are constantly sending out mass mailings in an attempt to lure potential customers to switch credit card providers.

And while it is generally not advisable to regularly open new credit accounts, there are times when doing so can be advantageous. But how do you compare all of the credit card offers to know that you are choosing the right credit card? There are a few things that you should compare and consider before making your choice.

The interest rate. Obviously the higher the interest rate, the more you will pay in interest charges. So the lower the rate the better. Many cards now offer zero-percent introductory rates for periods of up to a year. Transferring a balance to a card like this can be an effective way to pay down your debt quickly. But you have to read the fine print.

Credit card companies usually apply your payment to the debt with the highest interest rate first. So if your interest rate on purchases is 12 percent, your payment will be applied to that balance until it is paid off and then you will begin paying off the zero-percent portion. Because of this policy, many people realize little savings in transferring their balance to a zero-percent card. In order to take full advantage of the policy, you should not make any purchases on the zero-percent card. This will ensure that the balance will be reduced as much as possible before the introductory offer ends.

Reward programs are great ways to gain prizes or cash back by making purchases. Some cards will actually give you a small percentage (about one or two percent) of your purchases back as cash. Others let you earn points that can be redeemed for all sorts of merchandise, airline tickets, or gift certificates. Reward programs are a great bonus, as long as you are not paying extra for it. A higher interest rate will quickly eliminate any savings you receive through the reward program.

Annual Fees or Service Charges. I have never used a credit card that charges any kind of annual fee. It just makes no sense to me. There are so many credit card companies out there competing for my business, why should I have to pay for the privilege of using a particular card. Even if the card offers frequent-flyer miles or cash back, the annual fee will reduce or even eliminate the benefit gained. Shop around and you can find a card just as good with no annual fee.

Keep these 3 things in mind when you are comparing the credit offer and you can be confident that you are choosing the right credit card.