When used correctly, a credit card can be an effective tool to manage your money. If you have to make a large purchase, putting it on credit may make it easier to pay for that purchase over time. If you need groceries before payday, a credit card can provide the cash necessary to avoid hunger until Friday. What are some variables to consider when choosing a credit card?

How Good Is Your Credit?

Credit card companies may determine eligibility for a card based on your credit score. Often, there are different tiers of cards for those who have excellent credit, those who have good credit and those who have average credit. Anyone who has filed for bankruptcy in the recent past may have to apply for a secured credit card.

Secured Cards vs. Unsecured Cards

A secured credit card is one that is secured with an initial deposit. Generally, your credit line is determined by the original deposit that you made when applying for the card. An unsecured card means that a lender has no collateral backing up the loan. The interest rate and other terms are determined by your credit score and other variables that a lender may deem worthy when making a lending decision.

What is the Interest Rate?

Credit cards have an average interest rate of about 15 to 17 percent. However, it may be possible to get 0 percent interest for up to 21 months as a new cardholder from certain companies. Typically, the best credit card is the one that has the lowest interest rate after this period expires. Credit unions may be able to offer lower rates compared to national banks and other credit card issuers.

What Other Fees Does the Card Have?

It is not uncommon for a credit card to come with an annual fee of up to $35 or more. Credit card companies may also charge late fees if a payment is not made on time. You may also be charged a penalty interest rate in addition to the late fee. Payment return fees may also apply if there are insufficient funds to make a purchase.

Does the Card Offer Any Rewards?

While a credit card should not be used simply to get cash back or other perks, it can be a helpful way to save money on your next vacation. It can also be helpful for those who travel on a regular basis and receive cash back on the gas that they buy. In some cases, credit card companies will offer 5 percent discounts at certain retailers or have other deals that may be worth taking advantage of.

Credit cards can be an easy way to get into debt if you aren’t careful. However, if you make your payments on time, the positive credit history that you build can be helpful in many ways. For instance, good credit may make it possible to get a mortgage, lower rates on auto insurance and even get a job.