Credit Card Options

Cards, cards everywhere

Open your mail box and chances are half your mail consists of credit card solicitations. You've no doubt seen credit cards offering points or rewards that can be used towards air tickets, gift cards at swanky stores, or restaurant discounts. Others might offer cash back, low interest rates for balance transfers, warranties on purchases, and car rental insurance. All of them sound nice, but which one should you choose?

More important issues

So many credit card options and the benefits they offer often tend to take the focus off the interest rate that you are charged for outstanding balances. Before choosing a credit card, it's very important to take note of the card's interest rate and whether it varies with the prime rate or is fixed. A free trip earned through points is usually not a good swap for paying 5 percent more a month in interest. The savings from a less expensive card might pay for two trips in the time it takes you to earn the points for one.

The final cut

Sifting through countless credit card options and finding the right one might seem like a daunting task. However, looking closely at what the card has to offer before applying goes a long way in preventing nasty surprises in the future. Here are some tips to help you make a good credit card choice.

Read the fine print. Are you really going to get the benefits you want? Find out how you earn points and the point levels for the benefits you want. Make sure that up-front or annual fees are not so large as to erode the value of the benefits you can earn.

Spending versus benefits. Check your spending level against the amount required to earn the benefits. Make sure you'll use the card enough to earn the rewards that look so tempting on paper.

Overvaluing benefits. Be careful not to overvalue benefits you will not use. Priority reservations at luxury resorts or first call on tickets to popular performances are good benefits, but only if you actually attend these resorts or performances.

Knowing your card's limitations. Make sure you understand the conditions that apply to retail warranties that come with credit cards. Often there are restrictions as to the kind of goods covered, the time frame to make a claim, and the circumstances in which you will be compensated for damage or loss. Same with cards offering travel or car accident insurance. There are often many restrictions on coverage, so don't be too quick to assume that you don't need insurance from the agency the next time you rent a car.

Managing multiple cards

With so many credit card temptations, you probably have multiple credit cards. Be sure to add up all the service or other fees you pay to make sure the benefits you're getting for these cards are worth it. Keep in mind that you may not spend enough on one card to earn the rewards at all. With multiple cards, you can also more easily lose track of your level of debt.

More information on credit cards