1. A Debit Card Isn’t Always Better than a Credit Card

People often think that they can keep better control of their finances if they use a debit card instead of a credit card. Certainly, that’s what Peter Means thought when he went back to graduate school.

But the New York Times reports that he later lost track of his balance and used the card seven times in one day when he didn’t have the funds to cover the transactions. None of his purchases came to more than $12, but his bank still charged him $34 each time. That’s $238 in a single day’s charges.

2. Check Out a Credit Union Credit Card

For-profit credit card issuers usually make significant income from fees and penalties for late payments and exceeding credit limits. Generally, credit unions either don’t levy these charges or charge much lower rates. Their annual fees are generally cheaper and they often provide longer grace periods.

3. Take an Interest in APRs

The annual percentage rate (APR) is the single most important factor when choosing your best credit card deal–but only if you don’t pay your balance in full every month. If you’re unlikely to incur penalties for late payments or exceeding your credit limit, but you sometimes keep a balance running over a number of months, then you should choose a card because of its low APR.

4. Know Your Credit Card Issuer’s Balance Computation Method

Credit card issuers use different balance computation methods:

• Adjusted Balance
• Average Daily Balance excluding new purchases
• Average Daily Balance including new purchases
• Average Daily Balance double-cycle

According to the Federal Trade Commission, that list is in order of preference, with the best method from a consumer’s point of view at the top. If your credit card issuer uses the double-cycle method, you could end up paying over 400 percent more in finance charges than you would if it uses the adjusted balance method.

5. If You’re Worried about Your Finances

If your personal finances are already in a mess, then you probably won’t be able to get a new credit card. However, if you currently have a good credit score, but are worried that could change soon (and right now millions of Americans are in that position), then you need to shop around for a card with low penalties.

There’s no point in getting a great APR if it’s going to shoot up to something ruinously expensive if you have to skip a payment or exceed your credit limit.

6. Take an Overview

You may have to live with your credit card for many years, so take your time choosing the best deal for you. There’s no single criterion but consider all the factors listed above and a few more–annual fees, grace periods, and rewards programs.

Before you start filling in applications, think how you plan to use the credit card, and calculate how much it could cost you over a year. Be realistic about your likely spending and repayment patterns, and take into account any penalties that you may incur. That’s the only way to ensure that you find the best credit card for your needs

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