How do I chose a credit card?

Question

I would like to build some credit and am not sure how to go about picking a credit card. What do I look for? Are there any red f**s that would tell me NOT to choose a particular card? Any suggestions?

Answer 1

Things to avoid - annual fees.  Many cards have an annual fee, many do not.  Avoid the ones with fees, since they will cost you money.

Avoid high interest rates.  If you do not plan on paying the card off every month, the higher the rate, the higher the interest charged.

Do your homework - check to see how much the late fee is - we all miss payments by a day or two on occasion, so you want one with a low fee.

Check the late penalties - some cards will really jack up your interest rate if you are late or get you other ways.

When using your card, try not to purchase anything you don't have the money for.  Running a card up to its limit means large amounts of interest and hurts your credit score.  What you want is the largest possible spread between your limit and your balance (called available credit).  Up to a point, larger amounts of available credit will increase your score - above a certain point, you will have the possibility of having too much debt outstanding and your score may start decreasing.

Watch your credit inquiries - do not apply for more than 1 card if possible.  Too many inquiries will lower your score (looks like you are credit shopping and folks get worried you will get too much credit).

What I would do is get a card (one only) and use it for 6 to 9 months, always paying it off.  Then, get a second card, activate it, and then hide it somewhere - do not use it unless you positively absolutely have to - that means real necessity, not, I would like a plasma tv so bad.  If your car conks out, the repair is $3,000 and you need the car to get to work, that is a necessity, the $3,000 stereo to put in the car is not.

Answer 2

Credit card debt is a real serious problem.  I would be very careful about going for a credit card consolidation loan as the temptation is to keep using your credit cards after you have the loan.

I would strongly recommend getting rid of all your credit cards completely and not to get any more.  Then look at a credit card consolidation loan or pay them off a bit at a time.

I've found credit card companies are usually reasonable and if you contact them and explain you are having difficulties you can get them to freeze interest and accept a fixed amount every month to repay the loan.

Answer 3

Your credit score and record is the first thing you need to find out. There are very helpful tools on the web to assist you in a credit card search. I am dedicated to Finance Globe, because they offer info such as recommended credit scores, reviews, and the results of other applicants for a particular card. Try them out!

http://www.financeglobe.com/Finance/card...

Answer 4

Ask yourself this question. "Why do I need to BUILD credit?" Your credit score is a statistical figure calculated on how much debt you can "flirt around with".

35% is payment history. Do you pay your creditors? The only way to pay creditors is to go into debt.

30% is your debt level. In other words, how much debt do you have?

15% is length of credit history.How long have you been in debt?

10% are credit inquiries. How many times have you applied for credit?

10% is the mix of credit.How many types of debt and credit do you have?

Financial advisor Dave Ramsey affectionately calls your FICO score an "I love debt score". Remember, a credit score is not a measurement of how you are doing financially. It is merely a measurement of how much debt/credit lines you carry. You can even get approved for a home mortgage without a credit score. Simply look for lenders who do "manual underwriting". For everything else, simply save up and buy it with good old fashion cash.

I got my first credit card 20 years ago to "build my credit score". It was the worst financial mistake I ever made. I am now dedicating my life to helping others get out of the same financial mistakes I made. Take it from a veteran, credit card companies will bite you like snakes if you play with them long enough.