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Credit Card Applications - How do I choose the right one?

Comparing credit card offers can be a nightmare task if you are unfamiliar with all of the options and fine print that goes with each credit card application. Typically, all card offers now have some form of extra or bonus to entice you to select their card. What they don't tell you up front is that many of these "bonuses" also contain hidden conditions that can get you into hot water if you are not careful during the selection process.

Do you plan on carrying a balance? - Generally cards that offer reward incentives carry a higher APR, if you don't plan on carrying a balance then this does not affect you. Also many of the rewards programs have restrictions on them when you miss a payment or when your account is not in good standing.

Do you like to save a little on your retail purchases by getting cash back from the merchant? Do you have a favorite hotel you always use when doing business travel? You need to ask yourself what you will be using the credit card for first and then select the offer to match your needs, not the other way around.

Will you be replacing your current card or adding a new one to your collection? A typical feature of most credit card offers is the ability to transfer your old card's balance to the new one. Some cards will allow you to transfer the balance for free and carry it at a 0% interest rate for a introductory period of time. Some will even allow you to carry the balance interest free until you completely pay off the balance - a handy feature especially if you are carrying a large balance on another card.

Reward Programs

There are many types of rewards programs and even more combinations of rewards as card issuers compete for your credit dollars. In general though cards come under; airmiles, cashback or retail points rewards.

Miles - You earn Miles for airline ticket purchases or other predetermined purchases

These cards are great if you are a person who does a lot of air travel and already have a favorite airline chosen. But beware, cards in this category typically have a large annual fee associated with them reducing the benefits you receive from the card unless you are someone who uses the card often.

People who use their credit cards a lot and pay their bill off each month in full will get the most benefit from this type of credit card.

Retail Points - earn "points" which can be redeemed on purchases at selected merchants

Retail points reward programs may be the most popular and widespread of the reward programs available. Seemingly every retail outlet you can think of has their own credit card offer with a points system which allows you to save money on purchases by redeeming the points for goods at the retail outlet.

These cards are designed for people who do a lot of retail spending. If you have a favorite store find out if there is a credit card that will reward you for shopping there.

Cashback - get money back in cash form for using your credit card

Cash back rates vary by card offer but in general you will see rates of 1 - 2% and all the way up to 5% is possible to find. Remember to pay your bill each month since you don't want to use your cash back money to pay interest charges on the balance you carry.

The reason this type of offer is so common is because merchants who issue these cards can track the spending habits of the people who have them. This allows merchants to get an inside look into your world so be careful who you sign up with and what they are really offering you.

The best way to make sure that these credit card offers are a benefit and not a burden is to police your spending habits vigourously. Paying your bill at the end of each payment period ensures you receive the full benefit of the incentives your card issuer is promising you. It's not very good to have a 1% cash back card where you carry a balance each month that has an interest rate higher than 1%. You would lose money then which is not a "benefit".