How to Choose the Right Credit Card

Unbiased Financial Information Provided by Financial Finesse

Once you've decided what you want in a card, choosing the best one is just a matter of comparing offers. You can narrow down your options by answering three questions.

Do you plan to pay off the card each month or carry a balance?

• If you plan to carry a balance from month to month (even if you don't plan on it but past behavior indicates you probably will), make a low annual percentage rate (APR) the single essential feature for any card you choose. APR is the annual cost of using the credit. The annual fee may also be a consideration, but if your balance is large enough (and the difference in interest rates is great enough), the savings you get from a lower interest rate would likely more than make up for it.
• If you won't be carrying a balance, the interest rate won't be important, so look for a card with no annual fee.
• Understand the difference between a credit card and a charge card before accepting either. A charge card does not allow you to carry a balance - you have to pay off your purchases in full every month - and charges you an annual fee in exchange for a variety of benefits, e.g., frequent flier miles or traveler's checks.

Do you need a reasonable long-term interest rate or the lowest introductory rate possible?

• If you plan to transfer a large balance from another card and pay it off over a short period, look for the lowest and longest-lasting "teaser" rate. Teaser rates typically last from three to nine months.
• If you're not sure you can pay off your balance during the intro period, or if you plan to use the card and carry a balance in the future, you may be better off choosing a card with a decent long-term rate than picking a card with an ultra-low teaser rate that skyrockets later on.