Many people on a budget choose not to use credit cards so they don’t accidentally over spend. While that can be an excellent tactic for someone hoping to control their spending, credit cards can provide some benefits when used properly. When you pay off your balance on time every month credit cards can offer benefits and perks worth considering.
The first thing to consider about your credit card choice is your lifestyle and where you are at financially right now.
• If you are someone who has a balance of credit card debt, focus on cards that offer low interest rates and look at rates on balance transfers. A reward card negates itself because of the high interest rate you will be paying.
• If you pay your balance in full every month, you will want a credit card with no annual fees and a good cash rewards program.
• Consider specialty credit cards if they fit your lifestyle better than a general rewards program. If you spend a lot on gas, consider a gas credit card that gives added rewards on auto expenses. If you travel a lot, look for a card with rewards for flights and lodging.
• Are you a light spender or heavy spender? Some credit cards only give a small percentage cash back until you reach $1,500-$5,000 spending. If you won’t spend that much you will be better off with cards that offer a higher percentage on specific items.
There are a lot of options to consider and it really takes some research to find the best card. To start you off I’ve listed a few options to consider.
Cash back cards
If you use your credit card frequently, the American Express Blue Cash card is a good choice. When you first sign up, you get 1% cash back when you buy gas, groceries and drugstore items. Other purchases earn 0.5%. Once you spend more than $6,500, you earn 5% on gas, groceries and drugstore purchases, and 1.25% on other items. The card has no annual fee and no limit on the rewards you can accrue. (I have this card and have earned $600 cash back this year!)
Another top pick is the Capital One No Hassle Cash Rewards card, which earns 2% cash back on gasoline and groceries and 1% on other items. The card has no annual fee, no limit on the cash you can earn, and it carries a rate of 0% until August 2011. After that, the rate goes up to a variable 14.9%.
The no-fee ExxonMobil MasterCard earns you 15 cents per gallon when you gas up at an Exxon or a Mobil station. The card also has a tiered rebate of up to 2% on all other purchases until you spend $10,000 for the year. After that, you get 1% back. Rewards are credited on your monthly statement in $10 increments and expire after two years. The interest rate for the regular card is a variable 23.99%. For the platinum card, it's a variable 19.99%.
If you'd like to earn a rebate on all brands of gas, consider the no-fee Discover Open Road card. The Discover card offers a 2% rebate on gas up to the first $250 spent per month and up to 1% on everything else (the variable interest rate runs from 11.99% to 19.99%, depending on your credit history).
If you want to be able to transfer miles to more than a dozen frequent-flier programs and are willing to pay off your balance each month, the American Express Premier Rewards Gold charge card fits the bill. Each dollar you spend on airline tickets earns you three points, and a dollar spent on gas or groceries gets you two points. For other purchases, you earn one point per dollar. (One point translates to one mile in airline frequent-flier programs.) With this card, you don't have to worry about a limit on your points; nor will they expire. You'll pay a $175 annual fee, but it's waived the first year. Because it's a charge card, not a credit card, you may not roll over a balance to the next month.
Low Rate/Balance Transfer Cards
Capital One Platinum Prestige Card offers a 0% introductory rate until June 2011 on balance transfers and purchases. After the teaser rate expires, the rate adjusts to 11.9%. That means the card has a longer introductory rate period than most, CreditCards.com's Woolsey said, plus a lower long-term rate. The balance transfer fee is 3%.