Wednesday, October 29, 2008

Deciding Which Credit Card is Right for You

Not all credit cards are created equally. And so it makes it that much harder to decide which credit card. There are many factors you should take into consideration when deciding which credit card you want to get.

Some of those factors include:

  • Interest rate
  • Reward programs
  • Annual fees
  • Member benefits

Let’s look at these factors separately so you can see how to evaluate which card might be right for you.

Interest Rate
If you pay off your balance every month, most likely a low interest rate won’t matter to you. But most people are not so financially disciplined with their credit cards. Most people do carry a balance.

If you are late sometimes on your payment and carry a balance, then a credit card with a low interest rate is right for you. It could save you a lot of money. As you know, the difference between a 10% and 20% interest rate could be significant if you carry balances for a long period of time. All the major credit cards—Visa, MasterCard, Discover, and AMEX—have low interest versions of their credit card.

Reward Programs
Whether you have a Visa, MasterCard, Discover, or American Express credit card, all of them have reward programs. A popular reward program for most credit cards is a frequent flyer card like the Delta Skymiles Card and the Citibank AAdvantage Card. Both of these cards offer you one frequent flyer mile for each dollar spent. If you travel a lot, then this kind of reward might be exactly what you are looking for. Discover Cards are famous for offering a cash-back bonus on their cards. So, depending on your situation, this may be a card you might want to consider getting. Here is a list of just some popular reward programs that all the major credit card companies—Visa, MasterCard, American Express, and Discover—offer:

  • Frequent flyer program
  • Cash-back option
  • Discounts at retail stores or online chains, such as, Toys R Us, etc.

Annual Fees
Although rewards are great, none of these cards come without a price. Some have moderate, while others have expensive annual fees. Especially for people who pay off their balances every month, the annual fee is an important consideration. It might be prohibitive for some people, but not so for others. You should just consider if the rewards you are getting from the card outweigh the annual fee that you have to pay on your credit card. Moreover, there are many credit cards out there that have no annual fees. These might be worth considering if annual fees are your primary concern.

Membership Benefits
Benefits vary on cards. Some offer travel protection, while others offer roadside assistance. These benefits can be useful for your particular lifestyle. So, if you are selecting a credit card, it is important to weigh the pros and cons of its benefits. And it is another good idea to see if you can’t get the same benefits somewhere else for a cheaper price.

So, when selecting a credit card take all these things into consideration. Decide which card fits your lifestyle choices.

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