Finding the right credit card is essential. Credit cards, used right, can not only help you earn free rewards, but their perks such as travel medical insurance, car rental insurance and warranty coverage can save you tons of money. Have the wrong card however, and the first mistake you make can entrap you in a cycle of debt hard and expensive to recover from.
In your credit card comparison search, there are a few rules of thumb to live by:
1. If you spend less than $10,000 a year, don’t get a credit card with an annual fee. There are enough great options out there, that spending $59 to $120 for a credit card just doesn’t make sense. Think about it, if your points are worth 1% of spend, you’ll need to spend $12,000 just to break even on the initial $120 annual fee.
2. Get a rewards program with rewards you like, are transparent and give you maximum value. There’s no point in getting a travel rewards card if you don’t like to travel. Likewise, why bother getting a rewards credit card that makes it hard to redeem your points. Finally, compare credit cards until you find a rewards credit card that maximizes your spend. Each rewards card offers different levels of value depending on your personalized spending habits.
3. Watch out for credit cards that tempt you to fail and then punish you excessively when you do. Credit card companies publish rates and terms that benefit their best performing customers. The problem is, that’s not where the money is. They need customers that make a late payment, go over their credit limit, need a cash advance, or use their card out of country. And when you do watch out! You may just see your interest rate jump from your cozy 14.99% rate to 28%. Worse, they may apply that rate to your loan since the first day you took it out.
Despite the fact that there are a ton of credit cards out there, know that there should be one that’s right for you. Regardless, avoid carrying any debt at a regular interest rate on a credit card. Far better to use your card as a payment vehicle, versus a debt instrument.