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Which Credit Card Is Best?

FYL Credit Card GraphicIf you’re evaluating credit card offers, there are many things to consider before you sign up. Here are five of the most important factors to compare.

  1. The interest rate: Even if you don’t generally carry a balance over from month to month, it’s important to compare interest rates and shoot for the lowest one you can find. You never know when life events could interrupt your payment habits and may result in that interest rate being imposed.
  1. Rewards you can use: There are some great rewards card options out there, but there are also many ways that rewards cards can be less than rewarding. Watch out for—
    1. Caps: These are limitations to the number of points you can accrue.
    2. Blackout dates: When a rewards program includes blackout dates, it could be difficult for you to actually use the points you accrue.
    3. Expiration dates: When your rewards come with an expiration date, there’s an invisible clock running down as soon as you earn a point.
  1. Annual fees: Generally, you don’t want to pay for the honor of having a credit card. However, many cash-back rewards cards do have an annual fee. If you’re considering one of these, there are two things to think about:
    1. Will you pay off your balance every month so that you can be confident you’ll never pay interest?
    2. Will you spend enough at the right places that the cash-back rewards will exceed the annual fee? If your cash back is less than the annual fee, then it might not make sense to take the card.
  1. Penalties for missed payments: While you may not plan on missing any payments, a late payment can happen to the best of us. A credit card company is certainly acting within its rights to charge you for that lateness, but you should push for one with a reasonable fee.
  1. Transaction fees: There are many different transaction fees that a credit card can impose. Fees for foreign transactions, balance transfers, over-the-limit charges and so on. Try to find a card with low or no fees for the things you’ll actually use it for.

Choosing a credit card isn’t the same as picking out a magazine to read. It’s a big decision that impacts your budget, your credit and your financial future. Take the time to do the research to ensure you find a card that will be a helpful tool for your financial life, rather than one that sucks your bank account dry.

About Dennis M. Postema

Dennis M. Postema, RFC, is a successful entrepreneur, best-selling author, coach, speaker and registered financial consultant. He is the founder of MotivationandSuccess.com, StoriesofPerseverance.org, FinancingYourLife.com and TheRetirementInstitute.org.

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