What Card is Right For Me?
When most of us are starting out our lives as financially independent adults, we get a mixed message from our elders when it comes to credit. We’re told in one breath that we need a credit card because if we ever want to properly establish our credit and own a home one day, we need good credit, but in the next breath, we’re told that credit cards are the devil incarnate and that they should be avoided as if they were the Plague.
Well, to a certain extent, they are both right. You do need a credit card to establish good credit but if the cards are abused, they can ruin your life quicker than you might think. So, you must make a wise choice when it comes to picking out the right credit card for you.
Your first card will, most likely, be a student card. These are the cards we get while we are still in university and they come with a very small, usually under $1,000, credit limit and a fairly high interest rate, usually around 18 percent. But once you have shaken off the shackles of college life and are a full-fledged adult, what card should you go with? You have three essential choices:
A card with a low introductory rate that goes up after a certain time. These cards are extremely common and are a good choice if you have a large balance that needs to be paid off in a hurry. If you can pay down your balance during the intro period you can save a lot of money, but the trap is that the interest rate will rise too high once the intro rate is over and you’ll be stuck with a transferred balance at a high interest rate. The key to getting the right intro rate card is checking to see what the rate will be AFTER the intro rate wears off. If the rate is below 12 percent, you have a good card that you can use for years with confidence.
Another popular choice for credit card holders are reward cards. A reward card is a kind of credit card that gives you prizes or a reward for every dollar you spend. The first major kind of reward card was the Discover Card. They gave you “cash back†on your purchases every year. You usually earned 1 or 2 percent cash back at the end of every year, and if you spent enough, that reward could be pretty significant. These days, the most common reward cards are for air miles that can lead to free flights to and from your favorite destination. But while airline reward cards are the most popular, they are just the tip of the iceberg. There are cards attached to charities, purchasing points and a million other things. The most important thing to look for with reward cards is the interest rate. If it is low enough, sit back and enjoy your rewards!
A final kind of card is known as a secured card. A secured card is a card where you must pay the credit limit before you are allowed to use the card. Secured cards are a good first card to use and a good way to recover your credit after bankruptcy, but they are not a good choice if you already have established credit.
Choosing the right credit card can be a tough choice, but if you watch your interest rate and your fees, you can be happy with your card choice for years to come.