With economic times at a new low, you may be on the lookout for a credit card that not only has a low annual percentage rate (APR), but rewards you for using it as well. The good news is there are plenty of options out there, especially with the right credit score and understanding of what you need. Before you search for the best credit card deal to meet your standards, make sure you cover a few of the basic ground rules.
Step 1
Improve your credit score. Also known as a FICO score, your credit score is an index of your creditworthiness based on the last 7 years of your credit spending and repaying. The best credit card deals, including the best rewards programs and lowest APR fees, are reserved for those with credit scores of 700 or higher. According to an August 16, 2006, article in "Newsweek," 70 percent of credit reports have an error that may be lowering your rating. Before searching for the best credit card deal, order your credit report from the three leading credit reporting agencies and check for any errors. Also, if your score is less than 700, consider paying off any outstanding debts or balances. Within months, you can improve your credit score and increase your likelihood of getting approved for the best deals.
Step 2
Pay off your balance in full every month. Not only will it improve your credit score, paying off your balance will keep you from accruing any finance charges that may take away from your cash back rewards.
Step 3
Look for the credit card with the lowest APR, especially if you are not the type to pay off balances completely every month. The APR dictates how much you will pay in monthly finance charges if you cannot pay a bill in completion. For example, an 11.8-percent APR on a $600 outstanding balance would result in a $5.90 (600 x 0.118 / 12) monthly finance charge. Some credit cards, particularly those for retail stores, have a 20-percent or higher APR, which could double your $5.90 finance charge to $11.80 or higher.
Step 4
Do not invest in credit cards with annual fees. Unless you truly make use of the rewards program---perhaps for airplane tickets or cheaper hotel rates---you are better off in finding a rewards credit card with no annual fee, according to a June 3, 2008, "USA Today" article. The majority of credit card companies now offer great reward packages without the annual fee. Avoid it if you can.
Step 5
Find the right rewards program for you. Not all programs are created equally. Most will benefit you for gas purchases, but a select few will pay back 3 percent or more on groceries---a commodity that all of us could use.
Step 6
Make sure the credit card rewards you at least 1-percent cash back on all general purchases, regardless of how much you spend in a year. That way, you can set up automatic payments on your monthly debt, e.g., your electric bill, phone bill, mortgage and car payments, and still make a profit.
Member Comments