Posted by CreditCardCompare on Aug 24th, 2010

If you’re preparing to apply for a new credit card you may feel totally overwhelmed by all the options available today. With everything from cash back credit cards to balance transfer cards, it’s important to consider your personal needs when choosing the right card. This guide will go over ten important things to keep in mind to find the best card for you.

1. Check Out the Fees

One of the first things to consider with a new credit card is this: interest rates and annual fees. Always try to select a card that has a low interest if you plan to carry a balance at all and avoid cards with annual fees unless the benefits the card offers makes up for this. For example, many airline rewards cards have an annual fee but this is definitely worth it if you fly frequently and rack up lots of points.

2. What Are Your Spending Habits

Next, think about your personal spending habits to determine what type of card you want to apply for. If you make a lot of purchases each month and can responsibly pay your bill in full, try a cash back or rewards card. If you need to pay off a large amount of credit card debt, a balance transfer card is perfect. Those that want a basic or backup credit card should look for something with a low interest rate and no annual fee.

3. Transferring Balances

Balance transfer cards are a great option if you want to save money on an existing balance. Balance transfer cards offer promotional periods in which there is no interest charged, allowing you up to a year of free interest and the opportunity to save money while you pay down debt.

4. Earn Rewards

If you make frequent purchases at gas stations, grocery stores and restaurants you can probably earn a lot of cash back with the right card. This will only work, however, if you pay your balance in full each month. There are many types of rewards and cash back cards, including those that offer bonuses in some categories and others that offer gift cards and plane tickets instead of cash.

5. Credit Scoring

You should also consider your credit score when considering a new credit card. If you have a low credit score or have gone through bankruptcy you’ll probably have to select a simple credit card with a high APR and possibly an annual fee. You may even need to apply for a secured credit card, which requires a deposit of cash that’s equal to your credit limit.

6. Take Into Consideration Terms

There are also a number of terms you need to look at before you choose to apply for a credit card. The first term to consider is the annual percentage rate, or APR. The APR is applied to balances that exist past the grace period and determines how high your finance charge is each month. Usually, credit cards have different APRs for purchases, balance transfers and cash advances.

7. Look Into Grace Periods

Also consider the length of the grace period for the card. The grace period is the amount of time you have to pay off your balance fully before you will be charged any interest. Typically, the grace period is expressed in terms of days past the billing date of the purchase. The grace period may be anywhere from 15 to 40 days and longer grace periods are more desirable because they give you longer to pay your balance before you’re charged interest.

8. What Fees Are Charged?

Fees are the next term to check out before applying. Make sure all fees are reasonable and you know when they will be applied. Common fees include over-the-limit fees, annual fees, and late fees.

9. How Are Charged Calculated?

Next, how is the finance charge calculated on the account? There are a few ways companies do this. Some only consider the current month’s balance and others look at previous months as well; sometimes new purchases are included and other times they aren’t. The two most common ways of calculating interest is the average daily balance and the double billing cycle methods. The average daily balance method is preferable.

Choosing a credit card that’s right for you may take some work but it’s definitely worth it in the end. With a bit of research, you’ll end up with a card that suits your needs and saves you the most money.

Mark Brown writes for Credit Card Compare where he reviews balance transfer cards that help Australians get out of debt faster by reducing interest repayments.