There are so many different kinds of credit cards out there today, and it can be difficult to decide which one to apply for. So it's wise to carefully compare credit cards before selecting the one you wish to have in your wallet or purse.
Related: How to avoid credit card fees
Here are eight categories on which to base your next credit card decision.
- Card type. Check to make sure whether you are applying for a Visa, MasterCard, Discover, or American Express card. This sounds intuitive, but you'd be surprised how often consumers fill out applications for what they think is one type of card and receive a totally different card in the mail shortly thereafter. To be fair, card type is not always specified in advertisements for credit cards. (i.e. Chase cards are also Visa cards).
- Annual percentage rate. This is arguably the biggest determinant for deciding which credit card is right for you. The APR is the percentage of your average balance that you will pay in interest charges each year, so lower is better. You should also see what the APR is for both purchases and balance transfers -- because sometimes it's different.
- Introductory APR. Nowadays, many cards try to entice new consumers by offering a low-interest or no-interest APR for a finite time period. That's a nice perk, but only if you use it to your advantage. If you get a card with an introductory rate, charge only what you can pay off at the end of the promotional period; otherwise, you'll eventually have to pay the normal APR on those charges.
- Annual fee. Quite a few credit cards make you pay simply for the privilege of owning them. Often, companies will waive the annual fee for the first year for new customers. Be sure to take this annual fee into account when you compare credit cards without yearly fees.
- Other fees. All credit cards will charge fees for certain actions (or inaction) taken by the cardholder. These may include late payment fees, foreign transaction fees, or rewards redemption fees. These hidden charges can drive up the cost of owning a credit card, so be sure and know what they are and how to avoid them.
- Rewards type. Some credit cards offer cash-back bonuses that are credited to your account periodically. Others use airline miles as their currency, which can be redeemed for free flights or other travel-related benefits. And other cards simply offer rewards points that are redeemable for a wide variety of products and services. Consider your needs and determine which rewards type is right for you.
- Incentives. Most credit cards now offer some incentives which are designed to separate a given card from its competition. Incentives can range from double points on certain purchases to annual cash-back bonuses to travel or shopping perks. Even though these incentives may sound good, you should stop and think about whether or not you would actually use them.
- Fine print on incentives. Many of the above mentioned incentives have strings attached. Rewards points may expire, blackout dates may apply to free flights, and introductory rates may vanish if you fall behind on your monthly payments. Take the time to read the terms and conditions to see if the positives outweigh the negatives.
If you're searching for a new credit card, you need to do it right. Nowadays, websites make it easier for you to compare credit cards side-by-side. So weigh all of the information and choose the credit card that best suits your needs and financial goals.
Keep Reading: Five most important things about credit card offers
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