Okay, we now know the major differences between a debit card and a credit card. So, how can I know which credit card company is best for me and which will benefit me the most? We created a credit card checklist that is perfect for us who are trying to nav. adulthood.

There are a lot of websites out there that provide credit card reviews and ratings that you can sift through. But what should you be looking for? The most important things to look for in a card are interest or APR, credit card fees, billing cycle lengths, and benefits offered. Why? Because all those things have the potential to cost you extra money .

Also, before you decide whether or not to get a credit card – really assess what kind of saver/spender you are. It is important to note that in order to be a smart credit card holder, you need to be on top of your payments and cognizant of your spending.

First up on the credit card checklist:

❏ Interest (Annual Percentage Fee)

Like discussed in our intro to credit card article, credit card bills need to be paid on time in order to ensure a high credit score. They also need to be paid on time and in full to avoid interest charged. From a financial perspective, it’s essential you understand the interest rate charged on any debt, because that’s the rate in which your debt increases. Say you have $100 in debt. Even if you’re paying your monthly minimum of $10, the rest of your debt ($90) is being charged an interest rate that is compounding every month.

When choosing a card, understand the offers credit card companies (i.e. banks) are making. One offer you see a lot is a card (say Discover) is offering 0% interest fees for the first 14 months of owning the card. Don’t be fooled, after those 14 months, they are going to charge you a very high interest rate >15% sometimes up to 28% on your existing balance. So while they give you ‘free money’ for 14 months they make their money back plus more  in the interest they charge you if you haven’t paid off your balance by month 15. That means even more debt.

The key here is make sure you are taking correct advantage of this offer. All financial experts will tell you two things: do not get into too much debt throughout the grace period and ideally pay the entire balance off before the 14th month — play it smart!

❏ Fees

Not only do credit cards charge you interest on the balance of your debt with them each month, they also charge you fees to have a credit card. Most are annual fees, and a lot of times there are deals where they don’t charge a fee –have you heard the ad that says “we offer a one-time low APR and limited fee service”? The annual fee for maintaining the account is what they’re talking about and is definitely something to look for. Shop around until you find a credit card with either no annual fee or a significantly low fee.

Depending on the perks of the card, some fees can be from $50 – $299 annually. That’s more debt that’s added to your balance, that you then have to pay interest on if you don’t pay it off immediately. I.e. more money for the banks.

❏ Length of Billing Cycle

Most credit card companies have one billing cycle per month. So that means you have around 30 days to pay down or off your debt. Before signing up for a card make sure you know the exact length of your billing cycle because some companies may have two billing cycles which means more fees. This is also really important — if you miss a payment you get charged a late fee, so more money you owe. Again, credit card companies make their money off of borrowers (that’s us) paying interest and fees, so we need to be cautious when choosing and maintaining our cards.

❏ Benefits Offered

This is the “fun” item on the credit card checklist. A lot of companies offer discounts or rewards to credit card holders (throwback to me trying to get a 20 percent off discount at Macy’s by trying to apply for their card but sadly getting rejected because of my nonexistent credit score – if only I had this credit card checklist then).

When applying for your first credit card, think about what kind of reward is most relevant to you. If you travel a lot you may want to look for a credit card that offers miles rewards in exchange for your spending (remember check annual fees!). If you do a lot of shopping with your card, consider a card that offers a % of what you’ve spent (usually <1%) cash back annually.It’s also important to note that some credit card companies have partnerships with other companies like online shopping centers, hotels, or airlines. Don’t get sidetracked by the amazing rewards and forget to check for reward redemption charges of rewards caps. Remember, the credit card should work for you, not against you!

Conclusion

Of course, there may be other things you want to consider or include in your credit card checklist consider before choosing a certain card. However, the most important thing to remember is that these are your finances, and what you choose should work the best for you.

❏ Credit Card Checklist Honorable Mention: Card Aesthetic

I didn’t think this would be socially acceptable to include in the official credit card checklist, so I’m going to sneak it in here. Don’t forget to choose a cute card if they give you options! If we’re working on adulting, we might as well do it in style.

 

Image Credit: Mirjana Jesic

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