How to Choose a Credit Card

There is a credit card for everyone in today's consumer credit market. With so many cards to choose from, it's important to shop carefully, making sure your choice fits you and your budget perfectly. Before you start your search or sign on the dotted line, it's important to know what you'll be using your card for, what perks might interest you, and what interest rates you may qualify for.

Get Interested in Interest

Regardless of the type of card you choose, interest should be the most important factor. Credit card interest rates vary widely, with an average rate of about 15%. Applicants with excellent credit can usually find low interest credit cards at rates as low as 11%, while those with bad credit may find themselves paying up to 29%. Obtain a card with the lowest interest rate you qualify for. Even if you plan to pay off your balance monthly, a low interest credit card is still a good choice.

Credit Cards for Rebuilding Credit

If your credit score is on the lower end, a credit card can actually help you rebuild. Interest rates are also of particular concern to those trying to rebuild their credit. Bad credit credit cards usually charge much higher rates to offset the added risk, but they do offer a chance to repair your credit. Your credit score will improve as you keep your spending within limits and pay your bill on time.

Prepaid credit cards are also an option for those with very low credit scores. By depositing a specified amount into a savings account, the prepaid credit card owner essentially secures their credit card with a cash deposit. Timely payments and wise spending habits while using this card will help to raise your credit score.

Student Credit Cards

Student credit cards are designed to assist students or recent graduates establish credit and gain access to a limited amount of credit. After graduating from college without any student loan debt, it's a shock for some graduates to find they cannot qualify for a credit card.

By using a low-limit student credit card wisely, such individuals quickly build a solid credit history. Wise, first-time credit card users should follow these rules:

• Never exceed your credit card limit
• Pay credit card bills on time
• When possible, payoff your balance monthly
• Never lend your credit card to anyone
• Guard your PIN, credit card number, and personal information

Win Prizes Using a Perk Card

Perk cards are rewards credit cards that offer an additional bonus when used. These value-added credit cards allow you to earn free hotel rooms or travel, deep discounts on purchases, cash back, and more. Look for a rewards card that fits your spending habits and preferences.

If you like to travel, eat out, or shop at specialty stores, check out the wide range of perk cards that contribute additional value to your purchases. Free airline tickets are a great dividend for simply using airline miles credit cards.

Set Some Rules Beforehand

Credit cards can add flexibility to your budget. They are great for making online reservations, planned purchases, and for entertainment and dining out. Impulse buying, on the other hand, can spell disaster for your budget. Setting standards for use before your card arrives will help you manage your new card wisely.

Make it a rule to check your budget before you use your credit card. Ask yourself these important questions first:

• Do I really need this?
• Is this purchase part of my overall spending plan?
• Can I afford to pay off this purchase before the next billing cycle?

Choosing the right credit card makes your card a valuable financial partner. Be sure to carefully consider your options before making your choice.

Published: 1/12/2012

For more information on credit cards and related topics, please see our Credit Card Tips & Advice.

To apply for credit cards that fit your needs, please visit us at CreditCardXPO.com.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXPO.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.

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