Choosing the right credit card is essential both financially, and also for avoiding future complications that might arise if you fail to identify the pitfalls and plus points of the credit card you are using. A lot of people feel they have been cheated by hidden clauses, or fine print. The reason is simple, a majority of credit card users today have not given enough thought to choosing a credit card. There are so many credit cards out there that depending on an individual’s specific requirements it is important for a person to choose the right credit card.

The first step in choosing a credit card, is analyzing what your specific requirements are, for example if you plan to use a credit card only for emergency purposes, or once a year, you should look for a credit card that offers very low annual fee. There is no point in paying an exorbitant fee for just keeping the credit card active. Conversely if you are looking for a credit card that you can use on a regular basis for buying things like gas or groceries, then you should shop around for a credit card that offers you cash backs or reward points on gas and grocery purchases.

Depending on the credit card you are choosing there are a few parameters that you should keep in mind before you go ahead and apply for a credit card:

Annual fees

Depending on the credit card you are applying for, there is usually a minimum annual fee that applies, you might get a card that is waving the annual fees, in that case make sure that you understand if the card is free for lifetime, or for a limited period of time. In either case, you should try and get a credit card that has a low annual fee.

Know your APR

The annual percentage rate is the interest that credit cards levy on any purchase that is broken down into EMIs (Equated monthly installments), for example if you make a $1000 purchase and decide to pay back the credit card company over a period of 1 year, then depending on the APR that the credit card company is charging, you will end up paying  $1000 + interest due. The interest charged is clearly mentioned as the APR, and if you plan to use your credit card frequently, then you should shop around for a credit card that is offering low APR.

Also remember that APR is compound interest, that means you end up paying interest on the interest as well. Most credit cards actually offer installments on 0% APR, but this is usually for a limited period of time, or is an introductory offer, in either case you should clearly read the terms and conditions.

Balance Transfer

Balance transfer is a facility offered by most credit cards where you can transfer debt from one credit card to another. Balance transfer is an extremely useful feature if you want to pay off money you owe a particular credit card that is charging a high APR. Balance transfer is especially useful if you have received a credit card that is offering you low or 0% APR as a introductory offer. The thing to remember is that credit cards either have a limit on the value of the balance transfer, and also charge a small fee for balance transfer. Before choosing your credit card make sure you carefully read the terms and conditions when it comes to balance transfer.

Other facilities

Not all credit cards offer monthly statements or other facilities for free,  no matter what the scenario make sure you are fully aware of the various charges that are associated with the credit card. One of the biggest reasons of disappointment for users is that they fail to read the incidental expenses that are incurred, and later feel that they have been cheated. Whereas the credit card companies, as per federal law have clearly spelt everything out. I cannot stress how important it is for an individual to read the terms and conditions before agreeing to using a credit card.

In conclusion, there is no denying the importance of a credit card today, the utility that a credit card has is undeniable, all it takes is knowing how to choose a credit card based on its terms and conditions.

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