We spend a lot of time talking about paying off credit cards and avoiding credit debt like it was some kind of plague. That is because a large majority of consumers use credit in ways that end up costing them a lot of money, put them in a position of not being able to pay their bills each month, or otherwise having credit cards control them. The truth is: if you’re smart with your money, a credit card can be a handy tool. So how do you choose the best credit card?
There are a few simple things you should always avoid when looking for the best credit card:
- Never apply for a credit card that requires an annual fee. It is a costly addition to the credit that you simply do not need.
- Do not apply for a credit card just because you are pre-approved and get a fancy letter in the mail letting you know you’ve hit it big.
- Do not apply for a credit card only because of points, cash back offers ,or miles you can earn by using the credit card.
The most important factor in choosing a credit card is the interest rate. The lower the interest rate, the less it will cost you to use the credit. There are a few cards that offer interest rates lower than 10 percent, but those are typically reserved for people with the very best credit scores. The rest of us are usually shooting for an interest rate of 12-14 percent.
Once you have narrowed your search to those cards that offer you the lowest interest rate, you can then compare the cards to determine which offers the right incentives for you. A cash back card that only gives cash back on gas and groceries might be perfect for a family of five who can make the purchases on the card and pay them off each month, but that would not be ideal for the single business person who commutes to work and flies everywhere. That person would benefit more from a credit card that offered miles or hotel points for each use.
Ultimately, the only way a credit card can be useful is when the consumer can maintain control over the credit card and not let the credit card take control. To manage your credit debt effectively, be sure to investigate the many tools we offer to help.