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How To Choose a Credit Card

Jenna Taubel

Jenna Taubel About The Author

Aug 31, 2017 3:59:19 PM

Credit cards are a big responsibility. If you are thinking about getting a credit card, make sure it's the right one for you. While credit cards can do wonders for your financial life, it can also cause a lot of damage if you don’t choose it responsibly. When it comes to choosing the right credit card for you, there are several factors to consider. 

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There are a few important questions you need to ask yourself before picking a credit card. In this article, we’ll discuss the basics of how to choose a credit card. Since there is more than one type of credit card, you will need to know which one fulfills your needs and is the best option for you. 

Usage

Ask yourself, "how do I plan on using a credit card?" Which card you ultimately choose depends on your usage of it. Will you be using it for daily expenses or just emergencies? Will you pay the bill every month or do you plan on carrying the debt into the next month?

If you plan on carrying a balance from month to month you need to make sure the credit card you choose has the lowest interest rate and the longest grace period possible. If you use your credit card daily, then you may want to choose a rewards or cash back credit card. If you travel a lot, consider using an airline rewards credit card. If you are new to using credit cards with no prior credit history, secured credit cards are a great option.

Find Out Which Credit Card Is Right for You

Interest Rate

When selecting a credit card it is important to find out what the interest rates are. Does the credit card have a fixed or variable rate? A fixed rate will have the same interest rate each month while a variable rate can change over time. However, even a fixed interest rate can fluctuate if you pay your debt late or go over your limit. Choose a credit card with the lowest interest rate and pay your monthly charges on time to reduce your overall costs and improve your credit score. How to Choose a Credit Card | picking a credit card | how to pick a good credit card | credit unions credit cards | first alliance credit union mn

Charges and Fees

Before you apply for a credit card, make sure to read all the details in the terms and conditions of your agreement. There are many ways in which a credit card company can make money off of you. See if there are any hidden charges applied to your credit card. There are many cards that require you to pay penalty charges if you go over your limit or if you are late with payments.

Credit Limit

Credit limit is the amount of money you can borrow with your credit card. Your credit history plays a big role in determining your limit. If your credit score is high, then your credit limit is also high. It can be just a few hundred dollars to thousands of dollars depending on your credit limit. Also, if you are new to taking on debts, like credit cards and loans, then your limit will likely be lower than someone who has a longer credit history.

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Before you choose a credit card, make sure to compare all your options first. Store credit cards vs bank or credit union credit cards, Mastercard vs VISA? It can seem like a lot to consider, there are many credit card comparison websites that you can use that help tell you all the features and benefits of different credit cards, their fees and charges, their disadvantages, etc. Another way to compare credit cards is to look at their fact sheets. Compare repayment methods, interest rates, grace periods, annual fees and penalties.

Summary

There are many options when choosing a credit card. If you are ready to take the responsibility, you can apply for a credit card, but make sure that the one you apply for fulfills your needs and use the card in a way that doesn’t hurt your credit score. The trick for how to pick a good credit card is to not rush into a decision, but take your time to do some research first. 

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