Samantha Savory | February 29, 2012

Smart tips when shopping for a credit card

Credit cards can be an effective way for consumers to build a solid credit profile, earn valuable rewards and discipline their spending. But if mismanaged or misunderstood, this payment method can also lead to considerable credit card debt that weighs on individuals for years. In some cases, debt is exacerbated by failing to understand the key terms of a credit card agreement. So when adults are shopping around for a new line of credit, there are a few key points to pay attention to.

Before shopping around for a credit card, consumers should ask themselves why they need it in the first place. For example, are they planning on transferring a balance? Will the card be used for emergencies? Are individuals applying for the card because their other cards are maxed out and they can no longer meet their daily needs? If adults are seeking financial solace in credit cards, this may indicate a larger problem with their money and debt management strategies. Credit should never be relied upon to solve financial problems and adults who are struggling to meet their needs may be better off working with a credit counselor to get to the root of their problems rather than take on more debt.

However, if individuals are applying for credit as a way to build a strong credit score or make small transactions, it's important to read the terms and conditions to make sure they are favorable. Choosing a card with a low interest rate should be a priority, especially if cardholders plan to carry a balance from month-to-month. While individuals should try to limit their spending to amounts they can pay in full, having a card with a low rate can help them avoid racking up high interest charges if they are forced to carry a balance. Don't forget to look at cash advance, penalty and balance transfer rates, which may be significantly higher than the standard interest rate.

In addition, shoppers should examine each lender's fee structure before agreeing to the terms, according to Annual fees, maintenance fees and other charges can add up over time, and being abreast of these expenses before hand may influence an individual's decision.

Lastly, adults should make sure they understand the length of their grace period. Knowing this information can help cardholders avoid making late payments and racking up interest charges and penalties.

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