6 Things to Consider Before Choosing a Credit Card

Credit cards can be good or evil, depending on how you use them. They can provide emergency funds in a pinch, or they can leave you in debt that you'd have to win the lottery to repay. If you're in the market for a new credit card, here are six things that you should consider before you apply.
 

1. What's the APR?

The first thing you're going to want to look at with a new card is the APR or annual percentage rate. That's just a fancy way of saying the card's interest rate, the amount you'll pay every month on any balance that you carry on the card. According to the Federal Reserve, the average credit card APR in the United States is 15.09%. A 'good' APR would be anything below 17.57%. A lot of cards for those with poor credit have an APR of 25% or more. Be cautious with those, especially if you're going to carry a balance from month to month. 

2. Is the APR Fixed or Variable?

While we're talking about APR, is your card's fixed or variable? Fixed-rate APRs don't change over time, while a variable APR can rise or fall depending on index interest rates. If your APR is variable, the exact changes that you can expect will be detailed in your cardholder's agreement. 

3. Are There Any Fees?

Will you have full access to your balance when you open the account or will you have to pay off a large annual fee first? Are their annual fees simply for having an open account, and what are they? Make sure you're aware of any fees so you're not surprised when they show up on your statement. 

4. What Are You Using It For?

What are you planning to use the card for? If it's going to be an emergency card that sits in your wallet, you won't want one that has expensive annual fees. If you're going to carry a balance on the card, look for one with a low APR so you don't end up paying a lot of interest. If you're going to use it for balance transfers, look for one that has a low APR for those transfers and no transfer fees. The card you choose will should depend on what you're going to use it for. 

5. What Does Your Credit Look Like?

Your credit will play an enormous role in whether you even qualify for a credit card. It isn't the only variable that companies look at, but it's one of the most important. If you've got poor credit or no credit history and are working to improve it, you might want to consider applying for a secured credit card. Your balance on these cards is based on a deposit you make, so if you put down $500, you'll have a $500 credit limit. If you pay your bill on time, you'll eventually get the deposit back, and every on-time payment helps to improve your credit rating. 

6. Can You Maintain Your Balance?

Finally, are you able to keep up with your payments or are you getting a credit card with the intent of maxing it out without the means to maintain those payments? Applying for a credit card is useful but only if you are capable of keeping up with the payments, even if you're not paying down the whole balance. Defaulting on credit cards is a quick way to ruin your credit.
Moving Forward

Take a close look at the potential cards, as well as your spending habits, before you start applying. There are a lot of variables to consider and it's not a decision that should be made lightly.

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