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5 ways to pick the best plastic for you

by Peter Andrew

Your blogger recently wrote about gas credit cards, and rounded off the article with a piece of advice for readers: "Compare credit card offers to find the one that suits you best." But how do you know which card is likely to suit you best? Here are five key considerations for picking your plastic.

1. Credit card rates

It should be obvious, but many people forget that credit card rates are irrelevant unless you carry forward balances. If you always zero your account every month (and you're confident that you can continue to do so), then ignore rates and pick a card based on other criteria.

However, the opposite is true if you always or often have credit card debt. In that case, your first priority should be to explore low interest credit cards, and find the best deal you can among those. Forget everything else, and focus solely on low rates, at least for purchases that you won't clear at the end of each billing cycle.

2. Credit scores and limited choices

Get your credit report before you begin making credit card applications. If it contains errors (and some experts believe that up to 70 percent of U.S. credit reports do), get them fixed.

Then be realistic about choosing the cards you apply for. Honestly, American Express isn't going to give you a black card while your credit score is in the subprime range. Comparison shopping websites such as IndexCreditCards.com and CardRatings.com indicate how good your credit should be in order to apply successfully for particular cards.

And don't forget that making too many credit card applications in a short time can itself drive down your credit score, so it's genuinely important not to apply when you stand little chance of being approved.

3. Credit card rewards: the basics

If you never carry credit card debt and always zero your balance at the end of each billing cycle, then credit card rewards are likely to be your main priority when picking plastic. And, of course, there's nothing to stop you from having more than one card, so you could have rewards cards even if you do roll forward balances.

However, in those circumstances, you should charge purchases that you won't be paying for at the end of the month to one of your low interest credit cards, and only use a rewards card for items you will clear promptly. That's because, on average, credit cards with rewards programs charge higher rates than those without.

Whatever you do, be sure to read the small print in your agreement. Some rewards programs look great until you discover that they always seem to have blackout dates whenever you want to fly, or that all or many of the points you've accumulated have disappeared because they came with an expiration date or you made a late payment.

4. Credit card rewards: specifics

This is when it's most important to align what a card offers with your lifestyle. At it's most extreme, there's no point in having a travel rewards card if you suffer from agoraphobia or one tied to an airline if you have aerophobia/aviophobia (a fear of flying).

Obviously, it's usually more subtle than that. The questions you're more likely to be asking yourself are things like:

  1. Do I like this hotel chain or airline enough to tie myself to its generous rewards program, or should I find a general travel card that allows me to redeem points anywhere even if its rewards are less attractive?

  2. Do I drive enough miles each year to justify a gas card?

  3. Am I happier with cash back or am I more turned on by rewards points I can redeem for merchandise?

What you're trying to achieve here is not only to find a card that returns the best profit on your personal spending patterns, but also one that optimizes your enjoyment of life. And, of course, you don't have to restrict yourself to one or two cards. Use a cash back card when you think money could be tight (maybe over the holiday season in anticipation of a tough January), a travel card when you're building up points for a dream vacation, and a gas card when, like now, pump prices are particularly high.

5. Ask these questions

For most, credit card rates and rewards are probably the key card selection criteria. But there are others. So ask yourself the following before completing an application:

  1. Does the card have an annual fee and, if so, does that cancel out the benefits it is offering me?

  2. Does the issuer have a good reputation for service? With millions of cardholders, all credit card companies always have quite a few customers who hate them. But your family, friends and colleagues may be able to help you identify the particularly good, and eliminate the especially bad.

  3. Is the card you're considering offering an attractive introductory offer? With competition among credit card companies so fierce right now, some are offering introductory deals that are so generous they can outweigh other criteria.

Picking the right plastic isn't hard. But picking the wrong plastic can rob you of many of the benefits of credit card use you should be enjoying. So take a little time to make a smart choice.

Published 08/02/11 (Modified 07/09/14)


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