Credit Cards: The Good, The Bad, The Ugly
I get them in the mail. Promising 18 months of 0% APR. Offering 20,000 bonus reward points. Handing out 100,000 miles for an airline. I'm talking credit card offers. I know some of you don't use credit cards, while others have some cards (and debt)...and still others of us fall somewhere in the middle.
These days, with so much shopping done on the Internet (hello, airline tickets), it seems you can't go through life without having at least one credit card. But what kind of card should you have? How many cards should a family use? Financial gurus vary on this, each one having a little different take on the whole credit card world. Here are a few basic ideas to think about when choosing credit cards (or to analyze if yours are working for you):
-- You need more than one, but not too many. There is really no limit to how many cards you can get, though the money pros say to avoid getting too many, as it could affect your credit score. You need to build credit for that score to be in a good range (see more about credit scores tomorrow), so you should have more than one card. A good idea: have one or two cards that are accepted everywhere, and then a store card at a place where you shop often (those usually offer good discounts when you use it, but be aware of high APRs).
-- How are you going to use this card? Ideally, you will pay off the balance every month, but if there is a chance you won't, your primary basis of choosing a card should be a low APR (annual percentage rate). Be sure to read the fine print : see if that low APR change after a certain period of time, if the APR is different for cash withdraws or balance transfers, and so on. Remember, the cards with perks -- with bonus points or with cash back or to get airline miles -- often have higher APRs.
-- Choose rewards carefully. If you are going to pay off that card's balance every month, then get a card with rewards that really will help your lifestyle. If you go on vacation a couple of times a year, then those with airline miles or associated with a hotel is a good idea. If you are a shopper, then maybe a cash-back perk is right for you. You commuters probably know many of the cards that offer gas rewards. Again, read those rules and regulation in uber-tiny print to see if there are any restrictions on those perks (there probably are some).
-- See what else comes with the card. Aside from the really attractive perks, what does being a card member mean? There are some great advantages to using certain credit cards to make big purchases, like travel help (cancellation insurance, care rental deals, and roadside assistance) as well as purchase protection and extended warranties.
How many credit cards do you have? How did you pick them?