How to Choose the Right Credit Card

by Sean Bryant on November 16, 2012

Choosing the right credit card for you doesn’t have to feel like a chore, and there can be a big difference between different providers, different types of cards and introductory offers. Even though there are more options with credit cards than ever before, many people can still be tempted to choose a credit card from your existing bank, thinking it’s the easiest way. That could be the case, but it could also be that you’re missing out and not getting the card or the deal that is right for you. You might want to take a look at what else is available, and that is especially true if you have existing credit card debt and you’re paying more than 10% interest. There are a few things you’ll probably already be aware of, but everyone needs to be reminded about to make sure you’re choosing wisely.

Work out what type of card you really need

When thinking about your credit card, go back through your finances and think about how you spend your money, what you want to do differently and what you need to keep doing the same way.

  • Do you use cash whenever possible? If so, are you willing to change your habits if it could mean that you would reap extra rewards from using a credit card when purchases earn you points?
  • Do you fly often? Domestic or International? If you do then you will want to look into a travel rewards credit card.
  • Do you shop at particular stores more often, and do they have a decent rewards system? Can you use it separately to a credit card or does it make sense to use a store credit card?
  • Do you have existing credit card debt? If you do, you definitely need to look into a balance transfer credit card offer for as long as you need to comfortably repay the full amount. If it’s only a small amount of debt six months might be enough, but if not look for something offering more than a year interest free to give yourself time to manage the repayments.
  • Negotiate a better rate? This doesn’t mean just choosing a card from your bank. Call them after you’ve done some early research. Find a better offer from another provider first, see if they’ll match it and if they won’t, then you know where you can take your business.

Do a proper comparison

The next step is what many don’t bother doing enough, a thorough comparison of your options. Online comparison sites are a great way to at least display your options (they often list more than 50 providers), but go a little further down the list than just the top three recommended cards. The comparison process has been criticised by the group Consumer Action, and Time magazine because of the affiliate relationships many websites have with the same three or four major banks. That doesn’t mean it’s a useless process though. The trick is to be smarter than the websites and think of a comparison service as a menu, rather than a way to recommend your ideal card, because they do still have lots of options.

Compare different features next to each other, read some blog posts and if you’re still not happy, check out the bank’s website or try to speak to someone who uses the card you’re interested in.

Always read the terms and conditions very carefully before applying for a credit card

Look at the fine print before you sign on the dotted line and put your credit history at risk by making an application. You need to know exactly what your credit card offers, and be happy with most of the terms. Think about things like:

  • The reversion interest rate when a balance transfer offer ends (it’s often above 20%)
  • What insurance is available; domestic flight cancellation only, income protection, repayment protection?
  • Does the card have handy features most don’t know about like price protection – where if you buy something then see that it’s on sale later the credit card issuer will refund you the difference? Many do offer this counting on you not to use it, and you have to buy with the credit card to be able to claim

When you search for a credit card with these tips in mind, you’re more likely to get a card that you’re happy with, and get something back in terms of rewards too.

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Sean Bryant

Sean Bryant created in 2011 to help pass along his knowledge of finance and economics to others. After graduating from the University of Iowa with a degree in economics he worked as a construction superintendent before jumping into the world of finance. Sean has worked on the trade desk for a commodities brokerage firm, he was a project manager for an investment research company and was a CDO analyst at a big bank. That being said he brings a good understanding of the finance field to the One Smart Dollar community. When not working Sean and he wife are avid world travelers. He enjoys spending time with his daughter Colette and dog Charlie.
  • Since Mrs.CBB and I don’t really use cash we really wanted credit cards with good rewards points. She enjoys her PC mastercard for all her grocery perks and I enjoy my Canadian Tire card for all my tools and household items… it’s a win win if you know what you want. Free money is good! Mr.CBB

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