Because credit card debt has become a huge problem in America, many people have sworn off credit cards completely. That is one solution, but it isn’t the only one. Credit cards are convenient, can serve you well and can even make you some money. The trick is to know which credit card is best for you and to use it wisely.
Consider the type of credit you have. If you do not have any established credit or if you have poor credit, you probably need a secured credit card. You would put down a cash deposit that serves as collateral and as your credit line. The minimum is typically $200 to $500. Whatever you put down would be the amount up to which you could charge. Once you start paying back on time what you used, you begin to establish good credit as long as the secured credit card company reports your activity to the credit reporting agencies. After about a year, you can get an unsecured credit card. Avoid secured cards with unusually high interest rates and annual fees. Check both before selecting a secured card. Sometimes, a secured card with an enticingly low annual percentage rate (APR) has a high annual fee, which could make it a poor choice.
Choose a card with a low APR if you carry a balance on your credit card. Credit card companies can change their interest rates, and it is up to you to be attentive. You must be notified before your interest rate goes up. At that time, you can fire that credit card company by finding a different credit card and transferring your balance. Be careful with balance transfers. Your low rate with the new card could go up if you are late with a payment.
Look for a card with no annual fee if you pay your balance in full. Even if the interest rate is not the lowest, it doesn’t matter. You won’t be charged any interest if you pay off your balance each month. When you use your credit card this way, you are being handed a free money loan each month, as pointed out by editors from Kiplinger’s Personal Finance Magazine.
Compare rewards cards. Typically, you can choose from airline travel, hotel stays, merchandise gift cards or cash. The interest rate is typically higher with rewards cards, so if you carry a high balance, you should not choose this type of card. You can easily find a card that offers 1 percent back on your purchases and has no annual fee. Some cards offer 5 percent off on different categories, such as groceries or gas, which rotates each quarter or month. You typically need to sign up to get this deal, and if you forget, you miss out on the reward points.
Laura Agadoni has been writing professionally since 1983. Her feature stories on area businesses, human interest and health and fitness appear in her local newspaper. She has also written and edited for a grassroots outreach effort and has been published in "Clean Eating" magazine and in "Dimensions" magazine, a CUNA Mutual publication. Agadoni has a Bachelor of Arts in communications from California State University-Fullerton.