"A credit card allows you transcend time. For it allows you to put off until tomorrow what you bought today, while you are still paying what you bought yesterday."
-- Robert Morrissette 

Chosen well and used responsibly, credit cards can make your financial life easier -- though not quite offering the ability to time-travel. But if you receive lots of card offers in the mail, as many people do, it's easy to get confused. You go to a site with reviews of difference cards, and there are gobs of card products, and a wide range of terms and features applies to each. On top of that, different cards have different credit score requirements. Here's how to make sense of cards and choose the one will best serve your needs.

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Decide on the right kind of card for you

First off, understand that while there are literally thousands of credit cards out there, they tend to fall into a handful of categories. Depending on your financial health and your spending habits, certain kinds of cards will serve you much better than others. Here's a quick look at the kinds of cards out there.

If you're carrying significant debt, you'll need to pay off credit card debt and any other high-interest-rate debt as soon as you can. Balance-transfer credit cards and low-interest rate credit cards can be good for that. Great balance transfer credit cards will charge you no interest for a bunch of months while you work to pay off your debt, while great low interest rate credit cards can help you spend less on interest payments.

If you're not deep in debt, consider getting a great cash-back credit card or two, which will give you cash back or rewards that can be redeemed, delivering value. A particularly powerful niche in the reward-card world is the travel card. The best travel credit cards will reward you for your travel-related spending (often including restaurants) and/or will offer discounts on such spending -- and many offer free checked bags and access to VIP lounges at airports, as well.

If you do a lot of shopping, think about where you spend the most money, because many retailers offer cards that give you discounts when you shop with them. If you spend a lot at Amazon.com, for example, you can get a card that pays you 5% cash back there -- which can really add up. (Spend $250 per month at Amazon? That's $3,000 per year, enough to earn $150 back.) Other stores offering credit cards include Target, Costco, Gap, Kohl's, Lowe's, Staples, TJX, Toys R Us, and Wal-Mart. Some shopping cards might offer other perks, too, such as free shipping on items purchased at the sponsoring retailer, while others might let you return items without a receipt or will donate money to charity whenever you use the card.

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Find the best combination of credit card features

Once you've decided what category of card is right for your needs, you need to find the card or cards in it that will serve you best. Below are some valuable features to look for. Aim to get as many as possible -- especially the ones most relevant to you -- in any card you sign up for:

  • No annual fee. Most credit cards don't charge an annual fee. Note, though, that if a card charges, say, $99 per year, and will deliver, say, $200 or more in value, then the fee can be worth it. Even some $500 annual fees might be worth it, but tread carefully on such ground, because you don't want to end up paying $500 and not getting more than that in value.
  • No penalty APR. A penalty APR is what happens when card companies raise your interest rate, often to between 25% and 30%, if you're late paying a bill. Look in a card's terms and fine print to see whether there's a penalty APR, and consider avoiding the card if it's there. Plenty of cards don't have this feature.
  • No balance-transfer fee. If you're planning to transfer a balance, know that some cards will charge you about 3% to 5% of the amount you transfer from another card. That can still be worth it sometimes, but favor cards that charge no such fee, at least in the initial period when you make your transfer.
  • Low interest rates. If there's a chance that you will occasionally be carrying a balance, you should favor cards with a relatively low interest rate range.
  • No foreign transaction fees. Without this feature, if you spend money abroad or with a foreign-based retailer, you'll see currency-exchange-related fees on your statement.
  • Low fees. Many cards generate millions of dollars for credit card companies via the fees they charge cardholders. Look into what fees you might be charged for late payments, exceeding your credit limit, or having a payment returned (such as due to insufficient funds).
  • Cash back -- or points or rewards -- that can be earned as you spend with your card. You can find cards that pay you 2% cash back overall on your purchases, and ones that offer up to 5% or 6% back on certain categories, such as supermarket spending. Some cards have pre-set cash-back rates for certain categories, while others rotate categories that earn extra-big rewards every three months -- sometimes even letting you choose the categories.
  • Sign-up bonuses. Many cards, especially travel-related ones, will offer hefty sign-up bonuses that can be worth up to $500 or more -- if you spend a certain amount in the first few months. Go ahead and see what great offers you can find, but don't base any decision just on the bonus, and make sure you'll be able to qualify for the bonus with your regular spending habits.
  • Access to your FICO credit score. It can be helpful to be able to check your credit score now and then, especially if you're working on paying off debt and increasing your score. Many cards these days let you see your score, and some even print your credit score on your monthly statement.
man in suit holding out card on which is printed "credit score: excellent good fair poor", with a box to check next to each rating

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Build a strong credit score

Speaking of your credit score, know that it not only plays a part in how good an interest rate you'll be offered when you want to borrow money (such as for a car loan or mortgage), but it can also be the deciding factor in whether you are approved for a top-notch credit card with desirable benefits. Many of the best credit cards require high credit scores.

What's a high credit score? Well, basic FICO scores, which are used by about 90% of top lenders, range from 300 to 850. Here's how the folks at FICO rate the scores:

FICO Score Range


800 and higher



Very Good





579 and lower


Data source: MyFICO.com. 

If your credit score isn't high, you might want to delay getting a credit card for a while -- in order to increase your credit score. Here are the components of a FICO credit score -- it can help to know them if you need to beef up your score.

Component of Credit Score

Influence on Credit Score

Payment history


How much you owe


Length of credit history


New credit


Other factors such as your credit mix


Data source: myFICO.com.

Clearly, paying your bills on time will make a big difference, as will your not owing too much relative to your total credit limit. In other words, if your total credit limit (from all your cards) is $10,000 and you owe $9,000, you won't look as good, credit-wise, as someone who owes $20,000 and has a credit limit of $40,000. Spending a few months or a year increasing your credit score can pay off well, helping you save more and earn more.

Once you know what kind of credit card you need and what to look for in cards and once you're armed with a good credit score, you'll be in a great position to make the most of credit cards -- having them serve you well.