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Credit Cards

 | Jul 23,2007


Credit cards offer both enormous financial flexibility, while also creating the risk of going into debt.  Credit cards have many advantages but they should be used in moderation.  While a credit card is great for buying something you couldn't afford otherwise, or to use in case of emergency, this doesn't mean that you should overuse the privilege of credit.  It boils down to one simple reason: it’s more expensive to use a credit card than it is to pay with cash due to interest on purchases.

Studies show that a majority of cardholders do not understand the fine print on their credit card agreements.  Each card will have a different list of fees and different penalties for late payment.  Before signing up for a card, you should be aware of everything the card offers: from fees to reward points. 

The Importance of a Fico Score

The first thing that you need to learn about before you apply for a credit card is your FICO score. Your FICO score is going to determine what terms you are offered and which credit card programs you will be qualified to apply for. The easiest way to get your FICO score is to order it from Annualcreditreport.com or Freecreditreport.com.  Once you've got your FICO score in hand, this will go a long way towards determining how much you will be charged for an individual credit card plan.

Credit Card Fees

Here's a look at the most common fees you'll find on a credit card:

• Annual Fee: Many cards now promise no-annual fee, but not all do, especially cards for bad credit borrowers.
• Bill Payment Fee: Contrary to popular conception, it can actually cost you more money to process your bill online, rather than through the mail.  
• Grace Period: This is a very important one.  It's the amount of time between the moment you make a purchase on the card and the time interest is charged to that purchase.  So a longer grace period means you'll be charged less interest.  
• Late Payment Fee: If you pay your bill late, you may not only be met with higher interest rates, but a set fee as well.  

It's important to gauge all of these fees in a credit card search engine because on some cards the number of fees can outweigh what you gain from rewards programs.  In addition, you've got to factor in interest, or the APR (Annual Percentage Rate).

Credit Card Rewards Programs

Fees and interest are the bad news.  There are also plenty of rewards programs for every type of shopper: credit cards with airline reward points, bookstore reward points, gas reward points, automotive service reward points, cash back rewards points, Starbucks reward points...the list goes on. Look through the many rewards plans and check to see which rewards cards also have the best fee and interest rate plans available.  If you drive a lot or fly across country a lot, that should influence which card you choose.  

Shopping for a Credit Card

Once you have your FICO score you will be in the perfect position to comparison shop for credit cards. Start your comparisons by finding the credit card offers that are designed for people with your credit rating. If your credit score is over 720 then you have excellent credit, if it is between 700 and 719 then you have good credit, if your credit is between 620 and 699 then you have average credit and if your credit is under 620 then you are classified as having poor or bad credit.  If you've got bad credit and apply for a credit card for people with good credit, you'll merely be offered a card with higher rates.  

Learn What to Look for in a Credit Card

Your next step is to figure out what is normal in your credit rating category. You can do this by looking at several credit card offers. Figure out what interest rates are normal, what perks are normal, what rewards are normal and what fees are normal. Next you will want to identify credit card offers that are better than average. These will be the best credit card offers for you to apply for.  Our credit card search engine lets you compare credit cards side by side.

Learn How to Spot a Bad Credit Card Offer

Now that you know what good credit card offers look like in your credit rate category, you will be able to avoid bad credit card offers. You will also be able to avoid predatory credit card offers, such as those cards with a good initial offer, but very high rates after the promotional period is over.  There are also bad credit card deals in which the interest rate can go up regardless of past activity - i.e. it can go up even if you don't default.   Keep in mind that credit cards are like any other financial product; to get the best deal possible you need to know exactly what types of cards are available and which cards are most appropriate for your lifestyle. 

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