Tips for Choosing the Right Credit Card

By: Shane Stocks

Credit Cards are now one of the most popular forms of short term debt. The reason for this popularity is that credit cards offer flexibility and convenience that no other forms of finance can provide.

When it comes to determining which credit card is best for you, you need to match the credit card features and benefits to your individual spending habits. Things you need to take into consideration is:

&bull How quickly do you pay your credit card balance off?

&bull Is you credit card balance paid off monthly?

&bull Do you travel much?

&bull Is your credit card balance generally ongoing, therefore no longer short term debt.

&bull Are membership rewards important for you?

How do I Choose the right card?

The first thing to remember it that nothing in life is free. Therefore the more benefits the credit card offers, generally the higher the interest rate, and the higher the annual fee. You should always remember that the banks are in this to make money, so when they look at packaging a credit card offer, profitability is always high on their agenda.

Low Interest Rate Credit Cards

Low interest rate credit card market is currently being hotly contested. All the traditional banks have low interest rate offers however other issuers are making inroads into this space with very competitive offers.

These cards typically offer no rewards program for their credit cards. An interest free period on these credit cards is pretty much standard at between 40- 55 days, and generally have a late payment fee. Low interest rate cards are good for those people who:

&bull Generally have an outstanding balance on their credit card.

&bull Don't seem to be able to pay off purchases within the interest free period.

&bull Are not interested in receiving membership benefits

&bull Might be looking for flexibility in regards to medium term credit.

Many low interest rate cards are also offering 0% on balance transfer rates (generally for 6 months) . So if you currently have a high balance on and existing cards which you are trying to pay off, switching onto a card with a lower ongoing interest rate and low balance transfer rates is worth consideration.

Standard Credit Cards

Your standard credit cards generally offer a higher interest rate, membership rewards, interest free days on purchases (generally around 55 days), and a low balance transfer rate for an introductory period. In many cases these cards are what we have been holding for years and they are now coming under pressure with all the new low interest rate cards on the market.

These cards still have a place in the market and might be best for:

&bull People who are disciplined and pay the card balance off monthly

&bull Use the cards for convenience for everyday purchases.

Buying everything on your card and then paying it off within the interest free period allows you to obtain reward points and not pay interest charges.

Gold Credit Cards

Gold and Platinum credit cards generally have higher interest rates and yearly fees than other cards, however they also have higher rewards associated with the cards as well as other member benefits. When comparing these types of cards it is important to match the associated benefits of the cards to your own specific needs.

Income requirements for these cards can be higher than the standard credit cards, and then available credit limits are also generally higher.

These cards might be best for:

&bull People who are disciplined and pay the card balance off monthly

&bull Use the cards for convenience for everyday purchases. Buying everything on your card and then paying it off within the interest free period allows you to obtain reward points and not pay interest charges

&bull Travel frequently - can redeem rewards point for flights

So, when selecting a credit card take all these things into consideration. Decide which card fits your lifestyle choices.

Before applying for any credit card, be sure to discuss your specific financial needs with your financial advisor.

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