Paying With Plastic: Pick a Card - the Right Card

Paying With Plastic: Pick a Card - the Right Card

Credit cards

These credit cards often advertise introductory rates, which means that you'll have a lower annual percentage rate (APR) for a specified period of time, either on balance transfers or purchases, or both. This can be ideal if you wish to carry a balance each month, or if you have an existing balance to transfer from a higher APR card. But know that the rate will eventually rise, when the introductory period is up, to a rate the credit card company must disclose up-front.

Rewards credit cards

If you charge a lot of purchases and pay off your balance each month, you may want to consider a credit card that pays rewards. Each purchase you make may add up for benefits like airline miles, hotel stays, or cash back.

Be sure to find one with the right rewards for you. After all, you want to make sure you're going to use whatever you earn. Hard-earned rewards should never be wasted.

Secured credit cards

Qualifying for a credit card can be difficult if serious financial troubles have compromised your ability to obtain credit. Your best option may be a secured credit card.

Secured credit cards work like unsecured credit cards but require a deposit in the issuing bank. The credit limit is generally set at the same amount as the deposit.

Choose a secured credit card carefully. Look for a secured credit card with no application fee and a low annual fee.

Most importantly, make sure it reports to all three credit bureaus: Equifax®, Experian®, and TransUnion®. You can use a secured credit card to rebuild credit, but only if your credit is being updated with your new, good credit habits.

Student credit cards

Student credit cards are specifically targeted at post-secondary students, who have little or no credit history. While these credit cards often have high APRs, the right one, used wisely, can be a valuable tool in building credit.

One thing to keep in mind: federal law now restricts credit card companies from issuing a credit card to anyone under 21 who cannot show proof of income and the ability to pay back the debt incurred, or who doesn't have an adult co-signer.

Watch for fees

Regardless of the type of credit card you decide on, be sure to read the fine print in all disclosures—and pay close attention to fees. While many credit cards have fees, you can find no-fee options or you can avoid fees through smart usage. The most common fees are:

  • Annual fee. This fee is charged each year for the use of the credit card, and is charged separately from purchases. It is most common with rewards and affinity credit cards.
  • Late payment fee. If you make your monthly payment after the due date, you may be charged a late payment fee. The amount is disclosed by the credit card issuer. In addition to the fee, if you make your payment after the due date, your APR may rise.
  • Balance transfer fee. Many credit card companies allow - even encourage - you to transfer your balance from other credit cards. But when you transfer your balance, you will likely need to pay a fee, which may be a set amount, or a percentage of the transferred balance.
  • Cash advance fee. You can use a credit card to withdraw cash at an ATM, or over the counter at a bank. The fee is in addition to the APR charged for cash advances, and doesn't include charges assessed by the bank that owns the ATM.
  • Application fee.┬áSome credit card companies charge a fee just for applying for a credit card. It's important to note that not all companies charge an application fee.