Money To Live

September 7, 2008

Looking for a credit card

Filed under: credit — by moneytolive @ 5:00 am
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After giving her a copy of On My Own Two Feet, my cousin asked about getting her first credit card.

When deciding whether or not to get a credit card, one of the biggest things to consider is if you can pay it off each month. Using a credit card responsibly builds a good credit history, which will make it easier to buy a home or car later. If you are using a card to establish a credit history, one way to do this is to only buy groceries with the credit card.

If you decide to get a credit card, the next decision is which credit card to get. Advice on this comes in two varieties – go for the lowest interest rate or the best rewards. People carrying a balance want the lowest interest rate; people with no balance want the best rewards. Assuming you can pay the entire balance each month, go for a card that has no annual fees. For some “big spenders,” paying an annual fee for better rewards makes sense, but it takes charging many thousands of dollars to make this a good deal. I recommended that my cousin consider a USAA credit card (she is eligible to be a member because her parents are members). USAA tends to have good financial products with reasonable terms and strong customer service. For a first credit card, that may be more important than the rewards. The USAA credit card is ranked #1 by Consumer Reports.

My credit card

I charge practically everything to my credit card and pay the entire bill each month. I have an Amazon.com rewards card. Whenever I accumulate 2500 points, I receive a $25 gift certificate to Amazon in the mail. For most purchases, $1 = 1 point; for purchases at Amazon, $1 = 3 points.

If I wanted to get the maximum rewards from my credit card, I would only use this card for purchases at Amazon and would use a cash back card elsewhere. Consumer Reports lists “eight rewarding rewards cards,” and I could probably get a better deal by using one of those. For now I am not going to switch because I value simplicity in my finances. My current card costs me nothing and gives me bonus rewards that I like — who doesn’t enjoy getting Amazon gift certificates in the mail?

Resources for comparing credit cards

www.bankrate.com

www.consumerreports.com

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