When it comes to credit card decision there are so many choices out there that can be really confusing when trying to determine which credit card is best suitable. We are all different from our likes and habits and credit card companies know this and have created card fee structures that differ according to people’s credit card habits and circumstances.
While a specific card might be perfect for one person, it might not be suitable for another, and might even hurt that person financially. Because their credit card habits or circumstances are such that they are incurring fees that they wouldn’t be incurring if they selected a different card.
We really need to identify these credit card habits and circumstances, and then take an honest evaluation of ourselves to see which habits or circumstances we practice or have. At this point, we will be able to identify the credit card that makes the most sense. In addition to this, we will be able to see that different strategies are appropriate for different credit card habits and circumstances.
While there are many habits to examine there are two primary habits that need to be examined first because they have the most impact on how we should choose, after that we will examine other habits and circumstances.
These secrets are a must-know for anyone that has or is looking for a credit card.
An outline of credit card habits and circumstances as they relate to credit cardholders.
Habit #1 Carrying a healthy balance on your credit card.
This can be a good thing for building and maintaining high credit scores as long as the balance does not exceed 70% of the total available credit. If the average balance is substantial than an important card feature for this person should be the annual percentage rate or APR.
If you exceed 70% of available credit, you should either pay it down or get another card and spread the balance out as this can improve your credit score. Typically, you should only use between 50% to 70% of your available credit.
APR stands for annual percentage rate and is the interest that the issuing bank will charge you.
Some banks will advertise an introductory APR. Introductory APRs will generally last anywhere from 6 to 15 months and then your APR will go to a higher APR.
Another type of APR is called a variable rate APR. This type of APR generally fluctuates with an index. These are the two most common types of APR but there are others too. So read the fine print carefully and choose APR suitable to you.
Habit # 2 Paying your bill before the due date every month.
If this is your habit then you want a card that has:
- A grace period
- No annual fee
- Rewards of some type.
After all, there are a lot of card issuers who are competing for the business you might as well be getting rewarded for using their card and being a good customer.
Habit/Circumstance # 3 Travel Frequently
Many people travel often and don’t have a rewards card that rewards them with free air travel. For them to consider a program that offers compensation for things put on the card in the way of air travel, some of these programs can be generous and offer securities for the traveler.
A friend of mine received enough air miles from his normal card usage to take his family of 4 on a vacation and he didn’t pay a dime on airfare.
A few things to remember about these cards are:
They often have an annual fee generally ranging from $25 to $75 but if you use your card enough and travel enough this is not a factor.
Some of them have a slightly higher annual percentage rate but they may also have a grace period so if you pay your balance in full every month than this is not a factor.
As in the case of applying with any credit card, please, read the fine print carefully. I just got off the phone with a friend of mine that told me a story that when he was young, he got a credit card and didn’t read the fine print. Well as you can imagine he used his card in such a way that he incurred fees that he was not able to pay off in a timely manner.
Credit cards need to be used carefully. When this is done properly it produces good credit results and thus financial leverage can be attained. When they are used inappropriately it produces bad credit results along with regrets and financially challenging circumstances.
Habit # 4 We shop at specific places again and again.
If we get gas at the same gas station every week or we drink Starbucks every day or we go to the same supermarket every month or we buy books from boarders books every… and the list goes on.
If this is the case then you should try and find a credit card that gives you in the ballpark of %1 to %10 percent back toward purchases at our store of interest, others will give 1% to 5% cashback on your card for purchases at select stores.
Right now the buzz is all about cards that give %1 to %10 back toward gas purchases. The way gas prices have been rising continuously this is not a bad idea. Some of these cards will also have other excellent features like no annual fee, and possibly a low introductory APR.
Habit #5 You are sometimes late on your bills payment.
Most of the credit card issuing banks will raise your APR sharply if you are late on even one late payment.
Sometimes the due date for payment will not only have a day but also a time such as 2:00 pm. If you are 1 minute late your rate is going up, so be careful. Just a note, this can happen to anyone, after all, unforeseen occurrences happen every day.
If this does happen to you it’s not the end of the world. Usually issuing banks will not report to the credit bureau’s for thirty days after the due date so as long as you pay before then you will be OK.
You may have a higher APR but your credit won’t be hurt and that’s the thing you really don’t want to happen. Find out the details from the issuing bank what their policy is regarding reporting and select a card accordingly. Trust me this is an important feature to know about.
Circumstance #6 No credit or never had a credit card before.
If this is the case then you should consider a secured Credit Card. With this type of card, you deposit money into an account, and then you are given a card limit that is equal to your deposit amount. In this way, you cannot exceed your credit limit.
With this, anyone can qualify for a secured credit card and can have an opportunity to build a credit history. If you use your card appropriately and pay on time, often times the issuing bank will turn your secured card into an unsecured card. This can be a very effective way to reestablish credit and get a credit card for the first time.
Circumstance #7 Have some balance on an existing credit card with late repayment
You have a balance of $6,000 on existing credit card and one late payment on it. The interest went through the roof however you still have good credit, and you are a good customer overall other than that one late payment.
If this is the case you should consider a balance transfer credit card. But before transferring your balance you should know:
- Are there any fees for transferring a balance to the new card and how much?
2 Is the balance transfers’ APR fixed for the life of the balance or will it go up after 6 months to a year?.
Even it goes up after 6 months this might be a good option if we plan to pay it off before then or if we plan to transfer it again.
Sometimes these APR’s that go up after 6 months to a year can be 0%. This could make sense even if your APR was low on our previous credit card because you just can’t beat 0%.
Watch out for hidden fees like closure fees. Some companies actually charge you for closing your account. The only way to avoid closure fees is to carefully read all of the credit card’s terms and conditions before accepting it and make sure that no such fee is attached.
Circumstance #8 We have excellent credit
Then we should be able to find a credit card that has all the features we can reasonably expect at rates that are extremely competitive.
Circumstance #9 You are a student.
Students should consider student credit cards. Because if they have never had a credit card before they will have a better chance of attaining a student credit card as the issuers give students more leeway.
Studies have found that students are often more responsible with their credit cards than other youths and are more likely to pay what they owe.
Credit cards are almost a necessity in today’s society. It has become harder and harder to get through life without plastic.
If you want to make purchases over the Internet, booking a hotel room, or perform a wide variety of other financial transactions, a credit card is essential. And, the truth is, credit cards can be a valuable financial tool, provided you manage them carefully and effectively.
Hopefully, this information will help you sort through the credit card maze. The most important thing to remember is to read the cardholder agreement closely to find out the terms-especially after the introductory period is over.