Now, store credit cards may be tempting, especially if you enjoy shopping at a particular store regularly. The issue with these types of cards is that they often charge higher than average interest rates. What’s more, it also may bring out the shopaholic within you, causing you to spend more than you anticipated just to receive a discount. If you are going to sign up for a retail credit card, remember to stick to your budget and set up automatic payments so you don’t get dinged.
How to choose the right credit card
There are a wide variety of credit cards to choose from. The key differences to look out for are the interest rates, fees along with rewards and benefits.
Comparing interest rates
Interest rates may be an important factor for you if you don’t pay your balance in full every month. The good news is that plenty of credit cards offer low interest rates. Some may charge an annual fee, but it may be a better option than paying a higher interest rate.
On the other hand, be careful of introductory low interest rate offers, which are only applicable for a limited time. Read the agreement carefully, so you understand when the low interest rate will end, what the standard interest rate will be and if there are any other conditions.
Fee vs no fee
There are certain credit cards that charge an annual fee that comes with one-time bonuses or special benefits. For example, you may pay an annual fee of $120 for a special frequent flyer credit card that gives you exclusive access to the airline’s lounge or to redeem for future flights.
You will have to determine if the annual fee is worth the rewards you receive. If not, there are many credit cards that do not charge an annual fee and offer similar benefits. For several years, I paid an annual fee of $100 for a cash back credit card as I made some large purchases and received up to $500 in cash back at the end of the year. During the pandemic, the fee increased to $120 and my spending was reduced dramatically. It no longer made sense to continue using this card, so I switched to a no annual fee credit card where I could collect Aeroplan points instead.
Rewards and benefits
A rewards card can provide you with cash back on your purchases or offer discounts on products and services. If you love to travel, you may be enticed to get a frequent flyer card. Or, if you frequently rent a car to go on road trips, then you may opt in for a card with car rental insurance. Maybe you enjoy earning points for every dollar you spend at a particular grocery store. If you are still in school, you can consider student credit cards where you can build your credit history
When choosing the right credit card, you will need to determine how often you plan to use the benefits, how long it will take you to earn a reward and if you have access to these benefits through another method (such as another credit card, your employer, or an alumni group benefits). Be sure to read and understand the fine print because there may be restrictions that may hinder the total value of the rewards and benefits you will receive.
