Choosing the right credit card to avoid debt management troubles

January 18, 2009 | 275 views |  Print |  Email

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Credit cards are considered as a blessing to those who can use it properly. But to those who are having debt management problems because of undue usage of credit cards, it can be an excruciating curse because it can also give you a bad credit history if you don’t use it well.

In order to avoid debt management problems, people must know how to choose the right credit card for them. The following tips can help you choose the right credit card, which can veer you away from debt management problems. If you are getting your first credit card or you would want to avail of another, you must always:

- Consider interest rates. In most credit cards, interest rates come as “fixed-rate” or “adjustable rate”. If you opt not to choose low APR credit cards, you may consider choosing fixed rate credit cards. Many people—especially those who pay off their balance monthly or those who only use cards for small purchases-opt to use cared that has a fixed rate. Even if the rate is a point or two higher than the usual, it ensures that they can pay off their loan quickly without even noticing the difference.

- Conduct an extensive research on credit card fees, transaction fees, and other charges. Fees can be considered one of the bloodlines of most credit card companies. Since numerous companies are infamous for charging their clients fees that add up quickly, one should make sure to check the fees section of the credit card disclosure section before fully indulging into it. Some of the known fees collected are annual fees and cash advance fees.

- Check the length of “grace period.” The term “grace period” or “interest-free time” refers to the amount of time between the date of a purchase and the date interest starts being charged on that purchase. Majority of credit cards offers a standard grace period, which means that as long as the person pays for his/her bill monthly, there will be no finance charges. Since not all credit card companies offer a grace period, be careful not to choose them because they might charge interest immediately on every purchase you make.

- Avail of other benefits. Aside from convenience, other the additional benefits when one applies for a credit card include insurance, credit card protection, discounts, rebates and special merchandise. Other benefits also include rewards programs that lets you earn points that can give you cash back, free gas, gift certificates and free plane tickets. Before choosing the right credit card for you, you must consider whether or not these offers can make positive impact on your financial management.

- Take note of the credit limit. Basically, credit limit is defined in dollars as the total amount of credit a credit card holder is authorized to use. Apart from clearly identifying credit line and the size of the credit line, credit limit encourages and helps the holder to decide how reliable he/she can be when it comes to paying on time and keeping him/herself under the card’s limit.

- Make sure to understand all necessary and additional terms. While it is very important for you to identify first your credit card needs, it is equally important for you to understand almost all the underlying terms in credit card application and acquisition such as “amount due,” “minimum monthly payments,” and “prime rates” because many people are having a hard time managing their debt because they did not take time to fully understand these simple terms and its underlying conditions.