Criteria for Choosing the Best Credit Card

If you don't pay off your balance in full each month, a low interest rate is the most important criteria when choosing a card. Watch out for low "teaser" rates that rise within a short time. If you pay your balance in full each month, low rates aren't the primary criteria when choosing a card.

Some credit cards offers include annual fees, while others are free. Generally, the better your credit rating, the more likely you are to qualify for a no-fee card. However, no-fee doesn't automatically mean it's the better choice. By paying a fee, some credit card companies enroll you in special membership programs. These might include credit card protection for the account if you find yourself unemployed or become disabled, overdraft protection or special rewards or discounts.

Many credit card companies offer rewards or cash-back programs. You get a little payback, either in redeemable points or actual money, every time you use the card. If you use your card to pay for most items, including food, gas and clothing, the cash and points add up. If you travel a lot, cards offering frequent flier miles can help pay for trips. Are you planning to buy a new car someday? A card offered by an auto manufacturer can earn you points toward that new purchase.

When responding to a credit card offer, make sure to read the fine print. Even if the offer sounds good, the devil is in the details. Find out what the company charges for late fees or if interest rates increase if you're late with a payment. These fees can quickly eat up any benefits from credit card "deals."

To give yourself the widest choice in credit cards, improve your credit score. If your score is already good, you don't have a problem — and probably get lots of credit card offers in the mail. If your score needs work, try to pay off the balance in full every month, and make sure all payments are on time. If you pay off the entire balance for half a year, contact the lender to ensure that information is relayed to credit reporting agencies. After one year of paying off the balance and making on-time payments, ask the lender for a lower interest rate. If they don't lower it, find another credit card company.