The Best Credit Card...
Apr 02 '00
Finding a good credit card can made easy by understanding what type of credit card user you are. Are you...
Type A: These credit card users sometimes charge more than they can handle. Balances accumulate faster than they can afford to pay them off. Type A users typically make the minimum monthly payment (or a multiple there of) and pay a considerable amount in "finance charges" monthly. If you only occasionally carry a balance you may still want to consider yourself a Type A user (although you'll want to closely examine the interest you are paying).
Type B: While Type A credit card users rarely (if ever) pay off their credit card balances, the Type B user pays of their balance religiously every month. As a result, Type B users will never pay any finance or interest charges.
Type A users users should first consider changing their ways. They pay hundreds of dollars in yearly interest charges and receive nothing much of value in return. If however you are set in your ways (carrying a balance and paying minimum monthly payments), there are still some credit cards out there which will benefit you.
1. Find the lowest introductory interest rate (APR) you can find. Then call up all your existing credit card companies and transfer all of your balances to the new "low-rate" card. Reducing you interest rate, even for the short-term, can save you hundreds of dollars in interest payments. This site can help you locate a low interest card (some as low as 2.9% or lower).
http://www.bankrate.com/brm/rate/cc_home.asp
Remember though, introductory rates will go away after a few months (usually 6mos.). If you still haven't successfully paid off your balances once the rate jumps to the normal APR, you should consider repeating the steps. Find a new "low rate" card and transfer your balances again, etc.
2. Make sure to get a "No Fee" card. No use in adding an annual fee to the mountain of interest you'll be paying already.
3. Avoid rebate/point credit cards (affinity cards). These credit cards offer "rewards", but usually carry higher interest rates. And since the rewards are only earned on new purchases (not interest payments), the cost of the rewards will usually be far greater (in terms of interest costs) than the value of any rewards "earned".
If you're a Type B user (one who pays your credit card bill off every month), I applaud your financial savvy, read on. If you don't pay off your entire balance every month (Type A), you're throwing money away and shouldn't bother reading the rest of this opinion unless you want to see what you're missing.
Type B credit card users can earn some great benefits by simply choosing the right card.
1. Never use any credit card that does not give you something in return (cash, rebates, airline miles, free stuff, etc.). Referred to in the industry as "affinity cards". These cards typically have higher APRs (interest rates) to cover the cost of the rebates, miles, etc. This doesn't matter because you pay your bill off each month and won't ever pay a dime in interest.
2. Choose an affinity card that gives you something you would like to have or that improves your current point/mileage accumulation. For example: if you fly Southwest Airlines regularly, getting their card will increase your flight credit accumulation rate and lead to free tickets faster.
3. Once you've settled on an affinity card, spend as much money as you possibly can on the card. Credit card acceptance is now more wide spread than ever. The more you spend the more goodies you'll get.
4. Some affinity cards charge an annual fee. Don't reject a potential card just because they charge a fee. Some fees you can get waived by asking (most however will not). It may still be in your best interest to pay the annual fee to get the rewards that a particular card offers.
Some recommended affinity cards:
1. Citibank - American Advantage Card: ($50/yr fee) good if you live in an American hub (DFW, Miami, etc).
2. Discover Card: (No fee) up to 1% cash back on a scaled basis. Really only good if you'll spend at least $10,000/yr on the card. Even then, you'll only get about $85 in cash back. But hey, just $.04 cash back is more than most cards (and more than I'm getting for you reading this review).
3. Discover Smithsonian Card: (no fee) offers $50 U.S savings bonds (series EE = $25 initial value) for every $5,000 spent on the card.
4. Citibank SONY Card: Offers rebates on Sony merchandise = 1% of all credit card purchases & 3% of all Sony brand credit card purchases.
5. First USA Southwest Airline Card: ($29 fee after 1st. year) Get 1 flight credit for every $1,000 in purchases. 16 flight credits = free ticket. Flight credits are combined with your actual ticketed flight credits. Be sure to make reservations online = double flight credits!
There are hundreds of different affinity cards available. Simply find one you like and start spending!
Try some of these sites for various affinity cards:
http://www.citibank.com/us/cards/
http://www.firstusa.com/cards/more_cont.html
http://www.mastercard.com/cgi-bin/apply/cardsearch.cgi?list=checklist
Yes, I know there is more to a getting credit card than a cost/benefit analysis. There's customer service, and gold vs. platinum vs. titanium, etc. But at the end of the day, most credit card companies do a very good job servicing customers (some of this is due to the high degree of regulation bank and credit card issuers must endure). As for the color of the card, whether you can have your picture on it, or other "perceived status" elements a credit card might offer, they are really just marketing gimmicks to entice different market segments to apply for their card.
So all we are left with is whether the card gives you what you want at a low cost. Hopefully my thought have helped.
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