The average U.S. household carries $14,750 in credit card debt, according to CreditCards.com, and with that kind of money on the line, using the right credit card can make a substantial difference. Lower interest rates, consumer rewards, cash-back, airline miles whether you're getting out of debt or racking up perks, here's how to compare terms and offers:
Hunt for low rates. If you do carry a balance, finding a low ongoing interest rate should be a priority.
- Rates of a sort. You can compare offers by introductory and regular rates at sites like CardRatings.com, CardHub.com and LowCards.com. Look for a lengthy introductory offer on purchases as well as a low regular rate.
- Open pre-approved mail offers. Deals in your mailbox may offer better terms than those available to a broader pool of applicants online.
- Consider a balance transfer. Fees can be as high as 5%, but lengthy 0% or low-interest terms of up to 24 months can work out to be cheaper than paying interest on your current card.
- Additional resources: Use SmartMoney calculators to assess the value of balance transfer offers and lower rates.
Rack up rewards. Cardholders who never carry a balance can focus on getting something back for their spending.
- Aim for at least a 1.25% return. That's 1% per dollar spent, plus bonuses for purchases in specific categories. The comparison tool at BillShrink.com gauges which cards offer the best rewards for your spending patterns.
- Go for cash back. It's simple to calculate, unlike points or miles, which issuers can alter on the earning or redeeming side (or both) to make them less valuable.
- Annual fees aren't all bad. Cards with an annual fee can work out if you're a big spender. Many offer valuable extras that outweigh the fee, like a free checked bag for you and travel companions (worth $25 each) on an airline card, or double the rewards per dollar spent that fee-free card customers get.
- Additional resources: Track and trade rewards at Points.com. (Fees apply, however, so use sparingly -- say, when you're switching airline loyalties and don't want to lose your miles.)
Assess what's in your wallet. Compare offers on the market against terms of the plastic you already own. You may not need to get a new card.
- Call for a better rate. The CARD Act requires issuers to reassess higher interest rates. Ask if you qualify for a better deal than you're currently receiving.
- Review terms. Issuers often close cards to new applicants, or change the rewards for those who aren't longtime holders. Make sure you're not giving up the better deal.
- Additional resources: Calculate your debt load with SmartMoney.com's calculator.
What not to do. With so many cards on the market, it's easy to make one of these common mistakes.
- Don't chase rewards when you're carrying a balance. Rewards amount to about a penny per dollar spent, and just one month of interest charges can wipe out the value. Rewards cards also tend to carry rates a percentage point or two higher than cards without such programs.
- Don't forget about your credit score. Offers may list a range of interest rates, or use terms like "as low as." Consumers with scores of less than 720 on the 300-to-850-point scale are unlikely to get an issuer's best rates.
- Don't use just one comparison site. Some sites only list cards that advertise with them, which can mean less selection (a negative) or exclusive offers (a positive).
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