How to Shop for a Credit Card without Regretting It

Posted January 8, 2019 by in Lifestyle

The vast majority of adults in the U.S. use a credit card. In fact, over 80 percent of those between the ages of 30 and 49 have one. But not all credit cards are of the same quality. It’s important that you shop around for the best one for your specific needs. Here are a few ideas to help you get a new credit card without regretting it.

How Are You Going to Use Your Credit Card?

This might seem like a trick question. Don’t you use a credit card by handing it to a cashier at the store, or typing its number into an online checkout? Well, yes—but what’s going to be your specific use for this card? You might only want to use it for a few purchases each month in order to start establishing credit—especially if you’re a younger person without much savings. Are you planning to pay off your whole balance each month, or carry a long-term balance? The card you choose will play a huge role in determining how much you pay in interest over the long term.

Interest Rates and Fees Might Be More Important Than Rewards

Generally speaking, it’s optimal for consumers to pay off their entire credit card balance every month. When you use a credit card this way, it’s essentially just leveraging rewards, while building credit, with no real downside. This, however, isn’t an option for all people. About a quarter of U.S. adults currently have more credit card debt than savings.

People in this situation have no realistic way to pay their full balance each month. Part of the issue is that costs have been growing faster than incomes over the past decade—causing people to become ever more pinched for money. If this sounds like you, don’t let the great rewards program distract you from what’s really important: annual percentage rate (APR). This is the number that will determine how much more money you’ll have to pay above the original debt. Guess what: APR rates far exceed any benefits you might gain from rewards programs. Finding the card with the lowest APR will be your best bet in the long run if you can’t pay your full balance on a consistent basis.

Compare Rewards Realistically

For people who are able to fully take advantage of credit card benefit programs due to financial security, it’s still important to think critically about potential the rewards. Don’t get sucked into rewards that encourage needless spending. There are many credit cards that offer higher rates of earnings when you apply the rewards points to certain stores. This is often designed specifically to get you to spend too much, which can take you from a great financial situation to a shaky one. Do you fly a lot? Then you’ll probably want to consider racking up points for airlines. Otherwise, look for the cards that offer the best cash back. These things are less likely to entice reckless spending.

People who have fallen into a bad place with their credit cards by chasing rewards points need to alter this behavior before the debt gets out of control. It often comes down to mindset. Yes, you can of course buy things that aren’t absolute base necessities. But don’t ever justify spending more because you’re going to get money back from the credit card companies. They wouldn’t be hugely cash flow positive if this were the case. Individuals whose credit card debt has become completely unmanageable can look to debt relief services. Freedom Debt Relief reviews on sites like HighYa or TrustPilot show that they’re one of the most reliable organizations out there; and have helped countless people reduce what they owe.

How to Avoid Credit Card Debt

If you’re going to use credit cards, you should really make an effort to avoid getting into debt—or at least keep it to a minimum. There are a few things people can do in order to help with this:

Set hard limits on your spending. You know how much money you’re bringing in each month. If you’re consistently using credit in order to spend more than that amount, that pattern will eventually catch up to you.

-Make sure you understand all the interest and fees. Even if you don’t typically carry a card balance, some external event might require you to spend more money. This can saddle you with accruing interest if your credit card has harsh interest rates and late fees. Understand the fine print before you sign up for a card.-

-Put some money aside for emergencies. About 55 million people in the U.S. have no savings whatsoever. Random medical or other emergency expenses are the top cause for forcing people into bankruptcy. While it’s extremely hard to save money when you’re barely scraping by, accumulating credit card debt makes it even harder.

Out of control credit card debt is a scary thing. This is why you need to be diligent about using your card the right way. But choosing your card is also an important part of the process that’s overlooked by many people.