What's the ideal kind of credit card? What should you look for when choosing one?
Well, for starters, look for a credit card with no annual fee. If you're Foolishly planning to pay off the balance each month, the interest rate on the card won't be of paramount importance. However, do pay attention to the grace period, and aim to get a card with at least a 25-day grace period. That's the period of time when you don't accrue interest charges on your new balance. The longer the grace period, the more time you have to send in your check.
If you're not going to be able to pay off your balance each month, look for a card that excludes new purchases from the interest calculation period. That means it won't base the interest charges on two months of billing cycles. Some cards are set up to calculate interest that way, which ends up costing you more.
If you or someone you care about is mired in credit card debt, learn more in our nifty Credit Center, which includes info on getting out of debt.
Those who do pay off their balance regularly might seek out cards that offer rewards, such as 1% to 5% back in cash on some or all of your purchases.
Finally, remember that credit cards are a big business, and investors can profit from that business. If the industry doesn't make you uneasy, check it out. Look into card-issuing companies such as American Express, Capital One, JPMorganChase,Citigroup, Bank of America,and Wells Fargo. Many are sporting high dividends and are likely to keep making money off credit cards in the years ahead.
JPMorgan Chase and Bank of America are Motley Fool Income Investor picks. Take the newsletter for a 30-day free trial.