How To Choose A Credit Card

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Your credit score may just be a little number, but it packs a big punch. A poor credit score can keep you from getting a mortgage or a car loan. In addition, your credit score may haunt you for a long time if it suddenly drops. Of course, if you have a good credit score it opens a lot of doors for you. This is just one reason why it is important to think about which credit card you apply for before you do.

Every time you apply for a credit card, the company has to check your credit score. This is a bad thing. Numerous inquiries from credit card companies look bad on your credit report because it looks as though you are scrambling to open lines of credit, which can be a sign that you are struggling financially. Of course, this may not be the case. However, credit scoring companies all look at it the same way.

You can avoid scarring your credit score with credit card applications by choosing your card wisely. Choose a card that matches your lifestyle and works for you instead of against you. If you plan to pay off your balance each month, you might want a charge card instead of a credit card. American Express offers a number of charge cards with flexible spending programs that are perfect for people who plan to pay off their balance each month. They also offer some flexibility so that if you have an emergency you can use the card and pay off large charges over time. In addition most of their cards offer you reward points for using the card. On the downside, American Express charges an annual membership fee for having the card.

If you do not plan to use the card often, but plan to make large purchases on the card, which you will pay off over time you should get a revolving credit card, which allows you to carry a large balance over time. Of course there cards require you to pay interest on everything you buy. Interest expenses can get very high.

Other kinds of cards include:

1) A check guarantee card, issued by your bank, that you can use to ensure that your cheque will be honoured up to a certain limit.

2) A debit card, issued by your bank, where whatever you spend is immediately deducted from your bank account

Do you need a credit card?

a) A credit card means you don't need to carry huge amounts of cash around and risk losing it.

b) A credit card means you can buy items over the internet.

c) A credit card means you can make purchases abroad without having to worry about local currency.

d) A credit card gives the opportunity to spread the cost of a large payment over several months.

e) A credit card is useful in an emergency. For example, an unexpected repair to your house or car.

What You Need To Consider:

1) APR (Annual Percentage Rate)
This is the rate of interest that you will pay on any outstanding balance.

2) Special Introductory Rates
You may be offered a low or 0% rate of interest for a limited time (Up to 6 months) when you sign up for a new card. A higher rate of interest may be charged for cash withdrawals.

3) Balance Transfer Rate
Card issuers may offer you a lower rate of interest if your swap your balance from another credit card to theirs.

4) Interest Free period
Remember to check when interest payments will begin. Will you pay interest from the day of the purchase? Or will you have a number of days interest free before you begin to pay? There is usually no interest free period for cash withdrawals.

5) Cashback and Rewards
Some cards over points or rewards for every pound spent on the credit card. Make sure that these are appropriate for you. For example, there&'s no use collecting airmiles if you never fly.

6) Minimum Repayment
Remember to check what the minimum monthly repayment will be. If you borrow ?1000 on your credit card the monthly minimum repayment will probably be in the region of ?25. But if you only pay this amount each month it will take a long time to pay off the balance and cost a lot in total when you include the interest payments.

7) Annual Fees
This is the fee that the issuer will charge you every year for using their credit card. Not all credit cards have an annual fee, so remember to consider this when you are choosing which one is right for you.

8) Late Payments
There will be an extra charge, as well as the interest owed, if your payment is late. This charge may even be more than the amount you owe so be very careful to check what the charge is, and to ensure that all your payments are made on time. A good way of doing this is to set up a direct debit from your current account.

9) Exceeding Your Limit
You may also be charged a fee if you exceed your credit limit.

Choosing the right credit card is a complex decision, but it can be made easier by using the free online credit card finders at

Stephen Kelly is a financial advisor and the founder of Credit Card Buzz ( A free site with credit card reviews, ratings, analysis and online applications.

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