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If you take the time to match the proper credit card with your payment and spending patterns you can save a great deal of money. If you don’t, you stand to pay hundreds or even thousands of dollars of needless interest or fees. As credit card users we all have different spending and payment habits, but they usually fall into one of just a few categories: you might pay off your credit card bill completely every month, you just pay the minimum payment due every month keeping a manageable balance outstanding on your card, or you could be one of the millions of people whose credit card balances stay at or near the maximum amount allowed. Which ever one of these payment profiles fits you, there are hundred of credit card products to choose from that can help you get the most and pay the least when using your “plastic”.

You might be one of the hundreds of thousands of consumers who are spammed weekly by credit card vendors either by email or regular mail, and if you’ve chosen a credit card from the selection that has shown up in your mailbox you’ve probably not chosen the best one available for your particular spending pattern. Credit cards are big business today. Credit card vendors offer a huge array of incentives to lure your business. Four of the most common of these are cash back rewards, award point good for travel services and merchandise, 0% balance transfers and low interest on outstanding balances. Some even offer you the ability to custom design the picture on the card!

Whether you are interested in a credit card or not, when you get an offer in the mail check out the Truth in Lending Disclosure. Every credit offer contains one - it is required by law - but they can sometimes be a challenge to find in all of the marketing drivel included in the offer. Make a game out of reading the disclosure before discarding - it’s fun! Pay particular attention to the interest rate that they’re offering - it’s usually high, and isn’t even close to the best deal that you can get if you actively shop for credit cards. As a matter of fact, some of the interest rates are downright predatory! Whatever the interest rate is, find it, have a look at it, have a laugh and then throw it away. The best place to shop for real credit card deals is online. You can compare products head-to-head there, and it’s convenient.

The facts are that, given the four basic categories of rewards (low interest, cash back, award points, zero percent balance transfer), most credit card offers focus on one of these areas and either do not excel at the others or, again, are downright predatory. Here are a few guidelines for choosing the right credit card for your spending and payment habits:

1) Do you have a history of paying off the complete balance on your credit card every month? If so, you shouldn’t be too concerned about the interest rate on your credit cards. However, don’t discard interest rate completely! Keep the grace period in mind - that’s the amount of time between when you purchase something with your credit card and when the bank begins to charge interest on that purchase. Often credit card companies charge interest beginning on the date of the purchase - others offer a grace period that lasts until the end of the calendar month, or for 30 days. A longer grace period can help you save money. Also, if you have balances on other credit cards that are charging interest, a card that offers 0% interest on balances transfers may be the choice for you. Or choose a card that offers reward points - your next vacation could be free!

2) If you keep a modest balance on your credit card (somewhere between 0% and 40% of the maximum amount of credit allowed) then you should keep a keen eye on the interest rate charged on that outstanding balance, but you may also want to look for a credit card that offers cash rewards for its use. This usage pattern is most common, and is actually the credit card usage pattern that favors your ability to build good credit; it shows creditors that you are capable of managing your balance and also makes you an attractive customer because you maintain a positive balance.

3) If your credit cards are always max’d out - at or near their limits - then interest is king. In choosing a credit card you should absolutely find the card with the lowest interest rate available. It may even make sense to pay a small annual fee just to drive the interest rate as low as you can. Don’t depend on credit card marketing material that comes in the mail to help you find the best deal - shop for credit cards that offer the very lowest interest rate available, and the easiest way to do this by far is on line. With a low interest rate you can take control of the money that you pay in interest on your outstanding balance.

4) In all cases, whether you maintain no balance on your credit cards or the maximum available, you need to be sure to make all payments on time and in the right amount. Many credit card vendors will increase your interest rate if you make payments late - it’s in the Truth in Lending disclosure statement - and they do it without giving you any notice. Read your statement carefully every month to make sure that you know what you’re paying.

As with most financial dealings, an informed consumer stands to save money. In the case of credit cards the amount of money that you stand to save by optimizing your credit cards to your payment and spending habits can amount to hundreds or thousands of dollars per year. Get in a habit of reviewing your credit cards and shopping for better deals on a regular schedule; you can almost always find a better deal than the one you’ve been sitting on for the past year.

This entry was posted on Sunday, September 7th, 2008 at 6:26 am and is filed under Business.You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.