While some people think that getting a credit card is just a convenience and not something terribly important, it’s actually a huge financial decision. When you opt to own a credit card, you’re making a decision that can affect your financial situation, your ability get loans for things like a home or car, and even how you’ll look to employers later in life. If you get a credit card and make mistakes, you can suffer consequences of doing for years, maybe even your entire lifetime. So before you get a credit card, you should shop around and find the best card with the best rates and terms, to make it less likely that you’ll have financial problems because of it.
The best first step is to decide why you want the card, and what you’ll use it for. If you plan to use it for small purchases and to pay them each month in full without accruing interest charges, and you truly believe you’ll be able to do that, then you should consider a card designed for users like you. These cards will typically have a longer grace period in which you can pay the amount without it earning interest, and sometimes they’ll have no annual fee.
If you plan to use the card like most people and carry a balance from month to month with the convenience of paying it off over time, then carefully consider the cards you’re interested in and choose one with the lowest interest rate, also called the APR or annual percentage rate. Then the balance you carry with draw lower interest fees than on a card with a higher APR, and you’ll save money.
If you know you’ll often use it for cash advances from an ATM, read the fine print and check out the APR for cash advances. Typically, the interest on cash advances (and balance transfers) is different from the APR used for purchases. Find one with the lowest cash advance APR you can find. Be aware that even if you intend to pay of your balance each month in full to avoid interest charges, most cards don’t offer a grace period for cash advances. These will start accruing interest from the very first day.
You also might want to consider reward cards, or cards with incentives like frequent flyer miles, cash back rewards after you pay off your balance or part of the balance, certain types of insurance, and extra warranty on purchases. But examine these offers carefully for any surprises and changing APRs. You can also sometimes purchase insurance to protect you in case you can’t make the payments because you’re out of work because of illness or job loss and other types of insurance on the card itself.
Also examine the credit limit on the card to see if it’s going to be too high or too low, and whether or not the company will charge you a credit limit increase fee if you should ever ask to have your credit limit increased.
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