How to Choose the Best Credit Cards for You

In the wide world of credit cards, there are many options available to you. There are credit cards for gasoline companies, department stores, cards offering rewards, and others that offer an “introductory zero percent APR.” The types and number of credit cards you obtain depends on your purchasing needs and credit rating.

First credit card

If you are new to the credit game and are trying to obtain a first credit card, you may be best suited to apply for a gas or department store card. These are relatively easy to get approval, and using them prudently for a period of time will help you build your credit.

Secured credit card

A secured credit card is a good choice for those with no or bad credit. With a secured card, you make a deposit, usually up to $500, with a credit card company and upon approval they will issue a credit card with a limit up to the amount of your deposit. These types of cards can be good for establishing or re-establishing credit, as long as you make purchases under your credit limit and pay your balance on time each month.

Do you want rewards?

If you have established credit and make frequent purchases on your credit card, you may want to look into obtaining a “rewards” card. Many credit card companies offer rewards cards which provide incentives for using the card. Each time the cardholder makes a purchase using the credit card, they are given points that can be used to redeem for rewards such as free airfare, free gas, free shopping, free restaurant meals, etc.

A rewards credit card can be beneficial to you if used in the right way. The strategy is to find and obtain a credit card with no annual fee and does not apply finance charges to balances that are paid within the grace period. You can use your card to make purchases and pay them in full each month. Without ever receiving a finance charge and by redeeming your rewards, the credit card company is essentially paying you to use their card.

How many credit cards?

When you are planning to obtain credit cards, how many is enough and how many is too much? Again, it all depends upon your purchasing needs. If you can obtain one or two good bank credit cards with no annual fee, low interest, and a sufficient credit limit, you can use them to make all your credit purchases.

However, if your credit rating only allows you to acquire a Visa or MasterCard with a lower credit limit, you may want to obtain a gas and/or department store credit card as well. Having more credit cards allows you more freedom in making purchases from different vendors, but beware of the temptation to overuse them and charge up too much that you cannot afford to pay off.

The credit cards you possess in your wallet all make a mark on your credit history and report. Be sure when you are applying for the right credit card for your needs that you look carefully at the financial terms offered by the card and that you can manage the financial responsibilities.

Write to Grace Carter at grace@creditdonkey.com