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Guide To The Right Credit Card
By: Joseph Kenny
It’s everywhere you want to be. For everything else, there’s MasterCard. Don’t
leave home without it. Credit cards are everywhere – and their slogans make it
clear. In the past decade, more and more companies have jumped on the credit
card bandwagon to provide ‘affinity’ credit cards, branded credit cards and
credit cards that offer rewards for their use. You can get cash back, cash
donated to your favorite charity, cash in on your credit spending with airline
miles and tanks full of gas and more. There are credit cards for those with bad
credit, poor credit, no credit and outstanding credit. There are credit cards
with low fees, no fees, variable fees and fixed rates. There are even credits
cards that aren’t credit cards.
With all the bits of plastic floating around, how do you choose the right credit
card? Let’s take a look at the various reasons that people give for having
credit cards and see which kind of credit card is right for you.
I like to keep a record of what I spend
If your only reason for having a credit card – or your major reason – is because
it’s very easy to keep records of your spending, then your best choice is a
charge card like American Express. Charge cards allow you to purchase items and
pay for them later – as long as you pay off the entire balance each month.
Because of that, American Express tends to be the card of choice for businesses
and employee spending accounts. As long as the bill gets paid each month,
there’s no finance charge. You pay an annual fee and get a full, clear record of
your spending for tax purposes.
I can pay for it next month. –or- I don’t like to carry cash
Charge card again. As long as you’re able to pay your balance off each month, a
charge card is the least expensive choice for credit.
I want it now, but I can’t pay for it all at once
The card you want is a credit card like MasterCard or Visa. Credit cards allow
you to make larger purchases that you couldn’t pay for right now, and pay it off
a little at a time over the next several months or years. Essentially, a credit
card is a pre-approved line of credit. The credit card company sets a spending
limit, and as long as your balance stays below that limit and you pay at least
the minimum amount they tell you each month, you can use it to make purchases
for which you’ll pay over time.
I like to make the most of my money
Many credit cards come with special ‘incentives’ to get you to use them. The
most common are ‘cash back’ incentives. For every purchase you make, you’ll be
credited a percentage – usually 1-2%. Most often, the credit card company will
mail you a check for the amount you’ve earned periodically. You can get a 1-2%
discount on anything you buy – but it’s offset by the credit card fees and
interest that you’ll be charged.
I have no credit at all, and need to establish some
Look for a credit card with a low spending limit and a low interest rate. Use it
carefully, and be sure to make at the very least the minimum payment every
month.
I have poor credit and need to start rebuilding it
Secured credit cards are one of the best ways to rebuild your credit. You
deposit a specified amount into a ‘security deposit’ - a bank account with the
financial institution that issues your credit card. That amount is usually
100-150% of the amount of your spending limit. If you want $100 worth of credit,
you deposit $150, for example. That money remains in your account. You use your
credit card just like a regular credit card, and make your payments on time. If
you miss a payment, or default on the card, the bank can draw it from your
security deposit.
About the Author:
Joseph Kenny is the webmaster of the credit card comparison site The Card Guide
and also Credit Cards 121. |
