To most people, credit cards are a pretty homogenous product; you use them for your day-to-day spending and pay your bill at the end of the month. Some people pay them off in full and some people just pay off what they can, but essentially a credit card is a credit card.
The truth is that not all credit cards are equal and the best credit card for one person is not necessarily a good fit for someone else. Choosing the best credit card can make the difference between wasting money unnecessarily and earning extra money just for buying the things you would be buying anyway.
What Type of Credit Card User Are You?
The first thing to figure out is what type of credit card user you are. Everyone uses credit cards differently but for simplicity, there are a few different types of uses listed below. Decide which category best describes your usage and select a credit card strategy accordingly.
Long-Standing Balances
This group of people will use their credit cards either occasionally or frequently but will rarely pay off large portions of their bills. This is typically the case for people who are having or have recently had financial difficulties and may be working to pay off their debts.
The Right Card For You. If you fit into this category consider getting a zero-interest balance transfer credit card and using it to consolidate your balances. By doing this you will cut the amount of interest you are paying each month which will make it easier to pay off those balances. Ideally, you should stop spending on your credit card until your balance is paid off, but if you want to continue using a card you should get a separate card for your daily spending.
Inconsistent Payoffs
This group of people will sometimes pay off their balance in full or at least a large portion of it. They won’t pay back the full balance every month and they may have a standing balance for several months at a time depending on what costs they have to pay at the time. This behavior is typical of people who use their credit cards to pay for large bills such as vehicle repairs or major purchases.
The Right Card For You. If this is you then you should be aware that after 30 days most cards will start to charge you interest. To save money you should consider paying off your bill each month, but if that is unlikely then applying for a low rate credit card is the best strategy. Some cards have longer interest-free periods and some cards have lower interest rates; which option you should choose depends on exactly how often you expect to pay off your balance in full.
Always Paying in Full
This group uses their credit cards for convenience or as a way to improve their credit score. People in this group will pay off their full balance in full each and every month and will rarely (if ever) go past their interest-free period.
The Right Card For You. If you are in this group then the rate on your credit card is irrelevant because you will never pay any interest. People in this group should take advantage of cashback credit cards; cards that reward you for your spending. You probably have a good credit rating already and as a result, you will have lots of offers available to you. Look for a card which rewards you for spending money on the things you buy most often.
Summary
As you can see, there is a lot to consider when looking for a credit card. Most people just use a regular credit card and give it little thought, but if you are using the wrong type of credit card then you are at best leaving money on the table and at worst you are spending money unnecessarily.
