Eight Steps for Finding the Best Credit Cards

November 04, 2009

By Barbara Marquand | Money Rates Columnist

Eight Steps for Finding the Best Credit Cards

Choosing best credit cards 2012 can be a fairly simple proposition--you considered the interest rate and annual fee to figure out the best deal. But as the industry has evolved the variety of credit cards has exploded. Now there are zero percent balance-transfer cards, student credit cards, cash-back rebate cards and rewards credit cards offering points towards everything from airline miles to beauty products.

Just open your mailbox, log on to the Internet, or turn on your TV, and you may be exposed to offers for best credit cards 2012 of all sorts. The wide array of offerings can confuse even the savviest consumers. Which should you choose?

Finding the Best Credit Cards For You

Knowledge is power. In this case, learn the basics about credit cards, so you don't jump at the first attractive-sounding offer and pay unexpected costs later, and figure out which features you most want and need in a credit card. The best credit card for one person might not be the right card for you.

Here are eight steps for choosing the best credit card.

1. Plan Credit Card Use. American credit card debt totals a whopping $800 billion, and the average American family has seven credit cards. Unfortunately, too many of these families end up in financial trouble because their credit card spending gets out of control. Credit cards offer convenience, and using a credit card wisely--paying your bills on time and not spending beyond your means--can help you establish a good credit history. But convenience can be a double-edged sword if you're not careful. Credit cards are so easy to use they can feel like free money--until the bill comes a few weeks later. Plan how you will use a credit card and how you will track your spending before you apply.

2. Take Credit Card 101. Familiarize yourself with credit card terms, such as grace period and minimum finance charge. Know the difference between the annual percentage rate, or APR, on purchases, the cash-advance APR, and balance-transfer-APR. Visit the Federal Reserve Board for a thorough description of credit card terms.

3. Scrutinize Credit Card Advertisements. You can get information about credit cards from advertisements on TV, the Internet and direct mailings. But credit expert Gerri Detweiler, author of The Ultimate Credit Handbook, advises consumers not to rely solely on mail solicitations to find the best credit card offers. Those pre-approved offers you get may sound like personal affirmations, but they're really just marketing tools. Your name was taken from a mailing list, and the letter was sent as part of a direct-mail campaign. Don't take those offers too personally, and beware of scams asking for an upfront fee for a pre-approved credit card. These are typically are phony offers, and they're usually directed at people with poor credit.

4. Do your Homework. Get proactive and research credit cards in personal finance magazines and on reputable Internet sites. Use an unbiased source, such as CardRatings.com, to compare several different cards. CardRatings.com, the most comprehensive free source for credit card information, includes reviews from actual card holders and rankings based on fees, rewards, and card service.

5. Read the fine print. Don't get carried away with all the touted rewards and introductory low-interest rate offers. Read the disclosure chart--the fine print--usually on the back of the credit card solicitation. Here you should find information on the purchase interest rate, grace period, annual fee, minimum finance charge, transaction fee and late fee--all of which you should take into consideration as you consider a credit card offer.

6. Credit Card Qualification: How Do You Score? Your credit history determines the type of card for which you qualify. Credit card companies check your credit score to help them make a decision about whether to give you an account. We think it's a good idea to know your credit score before you apply. The higher your score, the better your chances for qualifying for a credit card with the lowest interest rate.

7. Consider Your Credit Card Needs. How will you use the card? Will you pay off the balance every month, or will you carry a balance. Look for the card with the lowest interest rate if you plan to carry a balance. You don't have to be as concerned with the interest rate if you plan to pay your balance in full every month, but be honest with yourself. Often consumers think they'll pay the balance in full, but end up carrying a balance and paying interest.

8. Weigh Rewards, Cash Back and Other Incentives. Think about the features that could benefit you most. There's no use earning airline miles if you hate to fly. A cash rebate for gasoline might be a better option in that case. Don't get so carried away with the incentives, though, that you ignore basic costs of the credit card. A hefty annual fee or high interest rate might wipe out any savings from rebates for merchandise, for instance.

Use these eight tips when researching the market for the best credit cards, whether you're looking for credit cards with low APR credit cards or reward programs, such as cash back. By understanding your needs and doing your homework, you should be able to find a credit card that works for you.

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