Chapter 2. How do I choose the right credit card for me?

 

Millions of credit cards are issued yearly, and they can all be classified into three distinct types of credit cards.

(a) Bank Cards (e.g., Visa, MasterCard, Discover)
(b) Store Cards (e.g., Macy's, Chevron)
(c) Travel and Entertainment Cards (e.g., American Express)

 

How to

When choosing a credit card, there are several things you need to consider as you compare choices, regardless of your personal reasons for getting a credit card.

    1. Check whether the annual percentage rate (APR) is fixed or variable. Fixed-rate cards are slowly disappearing. Variable APR is tied to the prime interest rate.
    2. Watch for periodic fees charged on other than regular purchases.
    3. Understand that Credit Limit is based on both personal and institutional risk tolerance
    4. Look for a minimum of 21 days in grace period (before interest begins accruing)
    5. Search for rewards programs and benefits that fit your needs (not the other way around)
    6. Find out how widely the card is accepted in case you decide to travel
    7. Look for cards that use adjusted balance method. This method has the lowest finance charges.
    8. Make sure you meet the age requirement of 21-year-old unless you use a co-signer or have a proof of income.

 

Consider several things when choosing a credit card

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Moreover, before you apply for a credit card, keep your identity safe as you provide personal and sensitive information - such as your legal full name, your address, and your social security number - on your application. Always make sure you are communicating with trusted financial institutions and watch for fraudulent transactions and offers. If you are asked by an unidentified party for information, do not respond to these inquiries. Instead, you need to decide which financial institution you want to pursue, and you initiate the contact.

 

Practice

Discuss with your friends or family members how to protect yourself from identity theft as you apply for a credit card.

 

Congratulations! You can move on to Chapter 3. What's in a credit card monthly billing statement?

To review the full module on Credit Cards, click here.

 

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This was made possible in partnership with The Singleton Foundation for Financial Literacy and Entrepreneurship. This video and more videos like this can be found on Millionstories.com.