The following is a post from Jenna Smith. Consideration was received for the editing and publishing of this post.
There are some people, like Dave Ramsey, who insist that credit cards are evil and should be avoided at all costs. If you have a shopping problem and aren’t good at paying your bills, then yes: credit cards are not your friend right now. Otherwise, credit cards can be incredibly useful tools if you choose the right one and use it wisely. So how do you do that? How do you make sure that you get the best card for your needs and, more importantly, for your shopping habits?
Your Credit Report is Always First
Before you apply for any sort of monetary credit, whether it’s a credit card or a loan, it is important to check your credit and make sure that it is free of mistakes. This way you won’t allow yourself to get talked into exorbitant interest rates or crazy high fees. It is also a good way to gauge how much credit you should be seeking and if you should be trying to get credit at all.
If your credit report is bad–if there is a lot of debt or if you have accounts that have been sent off to collections–you probably aren’t going to be approved for unsecured lines of credit. This doesn’t mean, however, that you cannot open a line of credit! In fact, opening a secured card can be a great way to start rebuilding the positive credit section of your credit report, which will help you get approved for unsecured credit later on if that’s what you want. There are several websites the show various credit card reviews detailing the pros and cons so that you can make an educated decision.
Look at Your Lifestyle
What do you buy? How often do you buy it? Do you love to travel and wish it were more affordable? These days your personal habits and hobbies are important factors when trying to find the right credit card. A few years ago they didn’t matter all that much, but now that there are dozens of different rewards programs out there all vying for your attention, they matter a lot. For example, if you want to be able to travel more, you’ll want to look for a card that offers you great travel rewards.
In this vein, it is also important that you find a card that doesn’t penalize you for certain types of purchases. For instance, many cards will assign one interest rate to credit purchases made in stores and another for cash advances (and then, they don’t let you “pay off” those cash advances until all of your in store purchases have been paid because they want to get as much interest as possible out of you). Others will give you X amount of points for purchases made in certain stores and Y amount of points for shopping anywhere else. If you constantly shop at those certain stores, that’s a great deal!
Pay Attention to the Details
Do not choose a card specifically based on points. A lot of creditors will promise amazing points rewards but then actually redeeming those points will be a nightmare. Before you sign on the dotted line make sure you understand how the points systems work and that all of the points you earn will be redeemable. Another trick that is often used is only awarding a small amount of points until a specific amount of money has been spent. The companies do this in the hopes that you’ll rack up lots of interest-worthy debt very quickly. Don’t fall for it!
What Are Your Payment Habits
Are you really good about paying your bills or do you sometimes miss their due dates? Have you ever completely missed a payment? Are you bad with details? Make sure that you choose a card that won’t overly penalize you for these mistakes!
And, of course, once you choose a card and are able to use it, make sure you use it responsibly! Don’t let the lure of points coerce you into ruining your credit!