Credit cards – it’s hard to imagine life without these little pieces of plastic that, on one hand, let us do so much and, on the other hand, can cause us so much trouble! Your relationship with credit cards is really like any relationship: it can be rewarding if you handle it right.

Let’s start by defining how you’re going to use the card. Will this be for everyday purchases like groceries and gas or do you plan to use it primarily for travel? Will you use it for personal expenses only, or do you also plan to use it for business-related expenses? Here are some things to think about when considering a personal credit card.

Introductory Interest Offer – We all get these “amazing” offers for a card with 0% introductory APR (annual percentage rate). But watch out for: (1) how long does the 0% last, (2) what’s the APR after the introductory rate, (3) does it apply to purchases and balance transfers, (4) does it apply to cash, and (5) do you lose the 0% APR if you’re late on a payment or if your credit score goes down?

Welcome Offer – How much do you have to spend to earn the welcome offer? Do you get cash, a credit on your statement or points that have to be converted? The Discover it® cash back card will match all cash back earned at the end of your first year with no minimum spending or maximum on the reward. So $150 cash back turns into $300. The Wells Fargo Active Cash® card gives you a $200 cash reward after you spend $500 in the first 3 months. And Blue Cash Preferred® from American Express pays $250 after you spend $3,000 in the first 6 months but has an annual fee after the first year. Sometimes the welcome offer is increased if you make purchases through preferred partners of the credit card (à la Chase Sapphire Preferred®).

Cash Back – Does the cash back offer change depending on the type of purchase? For example, some cards give you more cash back on entertainment or travel. Be sure to select one that matches your personal spending habits and keep an eye out for cash or points that expire. The Capital One Quicksilver cash rewards card pays unlimited 1.5% cash back on every purchase every day with no expiration date on the cash back and no limit on how much you can earn. If you spend a lot on groceries and gas, then look at the Blue Cash Preferred® card from American Express. It pays an attractive 6% cashback on U.S. supermarket purchases up to $6,000, plus 3% on U.S. gas stations and taxis, etc. That’s enough to offset the $95 annual fee that hits after the first year.

Simplicity – We’re all busy, so who really has time to navigate the maze that some cards have to maximize your rewards? Be sure your card makes it easy to get your rewards—maybe automatic cash back credit on your statement is the path for you. If you like to solve puzzles, take a look at the Chase Freedom Unlimited® card. The rewards range from 1.5 to 6.5% cash back but the categories and restrictions may require a spreadsheet to maximize its benefits!

Annual Fee – Annual fees range from $0 to $695 but the story doesn’t end there. The modest $95 annual fee for the Chase Sapphire Preferred® card can be quickly offset by the 5X reward on travel, 3X on dining and 2X on other travel purchases.

Regardless of what credit card you choose, pay off the balance in full each month to avoid the gigantic interest charged on outstanding balances. It can be tempting to buy something on sale but let’s say you buy a new cell phone, not because you really need it now but because it’s on sale. You spend only $800 when the regular price is$1,000. If your credit card charges 20% interest, you’ll have $160 in interest charges per year on the $800 purchase price. That will wipe out your “savings” in a hurry!

So, when selecting your credit card, take time to compare the pros and cons and select one that matches your spending habits. Avoid the trap of getting a new card just because it looks like a good deal because having too many credit cards can negatively impact your valuable credit score. Check your credit report each year to see how many credit cards are in your name. You might be surprised to find some you’ve completely forgotten about. Even though it will temporarily decrease your credit score when you close unused credit card accounts, it’s safer in the long run.

Read other articles by Priscilla:

Life Isn't a Straight Line. Enjoy the Journey.

‍

Disclosure:

The information presented is for education and illustrative purposes only. Opinions expressed are as of the date of publishing and are subject to change. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.

‍