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Three Considerations in Choosing a Credit Card

As of last year, American consumers carried nearly 610 million credit cards, at an average of 3.5 cards per cardholder. While that’s a whole lot of plastic, those numbers are expected to grow as issuers spend millions more in TV and print advertising and jam our mailboxes with pre-screened offers.

If you’re looking for your first credit card, or looking to replace or add to those already in your wallet, how do you choose from among those offered? While it’s tempting to base your decision on a shockingly low introductory rate or the fun and flexibility of designing your own card, it’s best to take the time to compare a few of the key costs of owning the card to be sure they mesh with your lifestyle. Here are a few tips for doing just that:

1. Check the Schumer box

Named after New York Congressman (now Senator) Chuck Schumer, who was responsible for the legislation requiring it, the Schumer box on credit card offers gives a standardized, detailed summary of the important terms of the card. This information will help you compare apples to apples when comparing one card’s offer to another’s. It includes:

  • The annual percentage rate (or APR) for purchases. 
  • APRs for balance transfers, cash advances, etc. 
  • The grace period. 
  • The minimum interest charge. 
  • Any set-up and maintenance fees, such as an annual fee. 
  • Any other transaction or penalty fees that apply, such as those for balance transfers, late payments, exceeding your credit limit, cash advances, etc.

2. Decide how you’ll use it

Different cards make sense for different life stages or situations. Do you plan on making a major purchase and carrying a balance for a while? The APR and the method of calculating finance charges will be important considerations. Will you use it primarily for travel? A card that offers extras, like car rental or travel insurance, hotel upgrades, or other travel perks might be worth seeking out. If you plan to use it occasionally or for emergencies only, look for a card with no annual fee.

3. Know your credit history

The fact is that the cards with the lowest rates and fees and the most attractive rewards, including points or cash back, are often reserved for those with the best credit. If you have problem credit or no credit, the cards available to you may require you to pay an annual fee or a higher APR, or subject you to a lower credit limit. Alternatively, you may want to consider establishing credit by getting a department store card first, which tends to be easier to obtain than, say, a MasterCard or Visa. Or, perhaps a “secured” (or prepaid) card, where you place a deposit and receive a credit limit equal to the deposit, will help get your credit on track.

Once you’ve received your new credit card, the most important thing you can do is use it wisely and protect your good credit. Never charge more than you can comfortably afford to pay, and don’t just pay the minimum balance. Many cards offer you the ability to download your purchase information to an application like Microsoft Excel, so you can track how much you’re spending and on what. Be sure to check all credit card statements against your receipts and report any unauthorized activity immediately to protect yourself from fraud.

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