When you are questioning “What credit card should I get?” you may need help sorting through all of the options on the market. It can be difficult to decipher the terms in even “consumer friendly” credit offers, considering how shrouded in legalese credit card terms and conditions usually are. Knowing first and foremost what is important to you in a credit card is the best way to get started.
Interest rate is one of the most important considerations in determining which credit card to get, since this rate determines what it costs you to access your credit. According to Bankrate, Inc., the average national credit card rates are currently around 14.02% for fixed rate cards and 14.58% for variable rate cards.
If you are not familiar, the difference between a fixed rate card and a variable rate card is that a fixed rate card typically maintains the same interest rate unless economic conditions or your credit drastically change. A variable rate card charges a base interest rate plus an additional rate based on a national index, which may periodically raise or lower your interest rate. The risk with a variable rate card is that your interest rate could suddenly go up by several percentage points.
Default interest rates are also an important factor. The default rate is the maximum amount of interest you will be charged if you are more than a certain number of days late on your payment, usually 30 days. After that, your interest rate will remain at the higher default rate for a long period of time, potentially as long as you maintain that card.
Fees Can Also Make a Difference
Fees often make or break a credit card offer, so it’s important to pay attention to the small print when decoding a credit offer. You can learn more about understanding these fees in a previous Stumble Forward article, “Credit Card Fees: What Are They And How Can You Avoid Them.” Here are a few of the most common fees to understand and watch out for:
- Annual fees, charged each year for using the card
- Transfer fees, for transferring a balance into or out of an account
- Cash advance fees
- Late fees
- Over limit fees
While I understand the necessity to issuers of charging certain types of fees, one thing I have never agreed to do is open a credit card that charges an annual fee. In my view, I already pay for interest charges and other applicable fees, so why should I pay for the privilege of using the card on top of that? However, there are certain circumstances – such as poor credit history – that can make opening a credit account that charges an annual fee the best option. If this is you, be sure to shop around for the best deal.
The Benefits of Different Card Issuers
There are three major types of credit card issuers: Consumer banks, which also handle consumer bank accounts; private banks, which focus on credit accounts; and credit unions, which are similar to consumer banks in many respects but are regulated differently and frequently have different offers for consumer credit cards.
So what credit card should you get? The type of credit card issuer you choose makes a big difference in your card. For example, a consumer bank is better equipped to handle all of your accounts from one convenient website. On the other hand, if you travel frequently and plan to use your card abroad, private banks might be a better option since they are more likely to operate internationally and may waive exchange fees and other charges. Finally, credit unions tend to be smaller than either of the other options, but may offer lower interest rates and more accessible loans to existing customers.
Choosing a credit card issuer that offers its customers alternative credit options is also a consideration. Many credit card issuers offer secured loans, and others offer convenient services like virtual credit cards. Read all about virtual credit cards and how they can make online shopping easier here.
You should also be sure to understand your fraud coverage. Buying with a well protected credit card can save you from being charged for purchases you did not make or made but never received, especially with online shopping. Read about safely using your credit card online in Stumble Forward’s coverage of “Is It Safe to Buy Online? How to Avoid a Bad Deal.”
Other Benefits to Consider
Rewards cards are another option, and are offered by all types of credit card issuers. If you primarily use your credit card in one purchase category, such as groceries, travel, gas, or retail, and also pay off your credit card every month, these rewards cards can rack up benefits like airline miles, redeemable points, or even cash back. If this interests you, you might also consider a limited use credit card, which only works at a particular retailer or group of retailers but frequently accrues rewards much faster than more widely accepted credit cards.
When you are trying to decide “What credit card should I get?” try doing the math on the interest, fees, and rewards you expect to accrue during the year to make sure that the credit card is affordable for your spending patterns. Compound interest has a way of catching people by surprise, and any benefits you expected to gain from a credit card can quickly be wiped out. Make sure you don’t get caught by surprise by becoming an informed consumer and choosing the card that is right for your lifestyle.