Credit Cards and You: Getting the Most from Your Credit Card

Four Steps to Choosing a Credit Card

Choosing the right credit card is much easier if you know what you're looking for and understand what the various credit card issuers are offering. Here are four steps you can follow to help you decide which card is best for you.

Step 1: Know your needs and wants

Ask yourself:

• How much will I spend on the card each month?
• Will I be able to pay my balance in full each month?
• Would I benefit from any reward programs?
• Am I prepared to pay an annual fee?

Step 2: Use Table 1 or Flowchart 1 to help you choose the right type of credit card

• There are many types of credit cards, including specialized cards. For more information on specialized cards, see Table 1.
• If you can't benefit from a specialized card, use Flowchart 1 to help you choose another type of credit card that meets your needs.

Step 3: Once you've selected the type of card, shop around

To compare the features and costs of cards from different issuers, see the comparison tables in the Credit Cards and You series.

Step 4: Before you make your final choice, make sure you understand all the terms and conditions of your credit card

This step will save you a lot of time and money! By understanding the terms and conditions of your credit card, you'll get more out of it. At the same time, you'll minimize the drawbacks of using the card. Make sure you know:

• the interest rate charged on purchases, cash advances and balance transfers;
• how the interest is calculated;
• the annual fee and other applicable fees;
• the grace period;
• the minimum monthly payment;
• what happens if you make your payments late;
• other features such as introductory offers;
• the order of transactions and how your payment will be applied; and
• how to make a complaint if you have a problem with your credit card.

A credit card agreement is a legally binding contract. Make sure you understand all its terms and conditions before you use your card. And if something isn't completely clear to you, ask questions!

For additional help on how to choose credit card that works best for you, see Your Credit Card Checklist, or use the Worksheet to Help You Choose a Credit Card (PDF Version, 55 kB).

Table 1: Specialized Credit Cards

Table 1: Specialized Credit Cards

Type of Card	Main Purpose	Features	Choose If...	Comparison Tables
U.S. Dollar	Lets you make purchases in U.S. dollars	Annual interest rate around 18% Usually has an annual fee May offer additional benefits such as accident and car rental insurance	You normally pay your balance off in full each month You often shop in the U.S. You have a U.S. bank account from which you can pay your credit card bill	U.S. Dollar Cards + Service Fees on Visa, MasterCard and American Express Credit Card Transactions
Secured	Can help you establish or improve your credit rating	Annual interest rate around 20% Requires a deposit to secure your credit limit May have a start-up fee Generally has monthly maintenance fees	You need to build a credit rating or rebuild a poor credit rating You are having difficulty obtaining other types of credit cards	Secured Cards + Service Fees on Visa, MasterCard and American Express Credit Card Transactions
Retail	Can offer discounts or reward programs at a specific store or retailer	Annual interest rate around 28% Generally has no annual fee Can usually be used only at the issuing retailer or a limited number of stores Calculation of interest is often complex Some retailers charge you less interest by calculating it from the statement date instead of the purchase date, or if you pay at least 50% of the balance	You normally pay your balance off in full each month You often shop at a specific retailer You can take advantage of the benefits the retailer offers	Retail Cards + Service Fees on Retail Credit Card Transactions
Charge	Has an unlimited credit limit	Must pay entire balance off each month Generally has a high annual fee High penalty interest rate for late payments (usually around 30%) Often has a longer grace period than other cards Often has reward programs Can usually be used only at the issuing retailer or a limited number of stores	If you pay your balance off in full each month If you can benefit from options such as unlimited credit or reward programs	Charge Cards + Service Fees on Visa, MasterCard and American Express Credit Card Transactions

Flowchart 1

Answer the two questions below to find what type of card is right for you.

1. Are you a student with a limited income?

2. Do you need special insurance options, such as car rental insurance or medical travel insurance?