The following is a guest post:
Credit cards are convenient because they are accepted almost everywhere. They are also good to have if you need to establish or build back your credit. But before applying for any credit card, you need to know which one best suits your needs and which ones you need to avoid.
First and foremost, evaluate your credit situation. Do you even have credit yet? Is your credit good? Could it be improved upon? Have you had to file bankruptcy or endured other financial strain?
People who don’t have any credit may be able to easily qualify for a credit card that was designed for beginners. Start out with a department store credit card or prepaid debit card to build a little credit.
Keep in mind that department store cards will have higher interest rates than most major credit cards, so if you don’t think you can pay off your balance in full every month, avoid them.
Prepaid credit cards, or secured credit cards, require you to deposit a certain amount of money to receive a specified credit limit. These may have the option of converting to regular credit cards after you prove your creditworthiness.
Anyone with good credit should have no problems qualifying for low interest or even interest free credit cards.
Never just apply for any credit card offer that you receive in the mail. Many of these interest free credit cards only extend the 0% APR period for one year before switching to a higher interest, so compare cards and read the fine print before applying.
Transferring balances from higher interest rate credit cards to one with a 0% introductory APR is a smart choice if you know you can pay off the balance within that introductory period. Double up on payments if you have to so your balance hits zero before the 0% interest period expires.
Although some cards may look good, many come with hidden fees. Most first-time credit card users overlook the fine print and wonder why extra charges appear on their statements each month.
Many credit cards come with rewards that seem too good to be true. These may include travel rewards, flight miles, cash back and even shopping sprees, but you have to use the card regularly to build up any amount of rewards that would be considered valuable.
Don’t apply for a rewards card only to let points go unused.
If you aren’t big on flying or traveling, you can save the annual fees these cards come with and put it toward your balance instead. Interest still accrues on rewards cards and this may end up costing more than the rewards themselves.
Remember that building and maintaining good credit always takes discipline. Pay your cards on time and strive to pay your balance completely off every month.
If paying the balance in full each month is not feasible, avoid making minimum monthly payments.
You want to double or even triple the monthly payments, especially if you have a large balance, before interest accumulates beyond your control.
Deciding which credit card is right for you is a big financial decision, so shop smart and compare credit cards. Doing your homework may mean the difference between financial ruin and financial independence.