The Right Match – Finding the Best Credit Card

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The following post was featured in the March 12th Yakezie Carnival – Spring Training Edition.

Today’s guest post comes to us from William of Home Loan Finder.

The Right Match – Finding the Best Credit Card

Finding the right credit card for your style of spending is important. There are credit cards with low interest rates for those who carry a balance, and credit cards with high interest rates to compensate for reward programs. Either way you look at it, you’re going to need the card that’s right for you to keep your credit on track.

The Types of Spenders

According to a recent study by Cannex, there are four major types of credit card users. They are: habitual spenders, everyday spenders, impulse spenders and big spenders. There are cards that are appropriate for each group, but to know which is the best credit card for you, you must first decide what kind of spender you are.

The Habitual Spender

A habitual spender is someone who regularly spends more than they can afford on their credit card. Because of this, they often carry balances over, revolving from month to month and adding interest to their balance. This happens because these spenders don’t have the money to cover the total amount of their balance.

The Impulse Spender

An impulse spender spends money on their credit card on impulse items. This could be a drink at a gas station or holidays, Christmas, and birthdays. Unfortunately, these spenders, too, tend to have revolving balance from month to month, adding interest to their balances each month because they can’t afford to pay the entire balance.

The Everyday Spender

An everyday spender uses their card for almost all of their everyday purchases. The difference is that while they use their card for most, if not all, of their purchases, they’re saving the money from their paychecks. They then pay the balance off, in full, almost every month. Occasionally, they’ll carry a small balance between months.

The Big Spender

A big spender, as the name implies, regularly spends more than most people on their cards. However, like an everyday spender, they have the money in their bank accounts to pay the balance off, in full, pretty much every month.

What Card Suits Your Style?

If you’re an impulse or habitual spender, it’s likely that the most important thing to you is a low interest rate so your balances don’t get completely out of control. You’re not looking for a major rewards or points program on your card, as long as you can find terms and conditions that offer a lower enough APR that your balance stays manageable.

Conversely, the goal of an everyday spender is to rack up as many reward points as they can to get the free rewards. Since they always pay their bills, every month, the interest rate on the card is next to irrelevant. A big spender is looking for reward programs or points, as well is premium services as part of their credit card account. As they always pay the balance off in full, the interest rate is largely irrelevant. This is especially true when compared to the perks of membership with the card such as free concierge service or free travel insurance.

Comparison Shopping

If you’re in one of the latter two categories, you can benefit from doing some comparison shopping. Its important to check things such as the life of the points you earned, and what those points are actually worth in dollars. Free flight miles or free gasoline may sound great, but if the amount of points you must accumulate doesn’t fit with your spending, then you may just be wasting your money.

As an example, a card may allow you to redeem $10 for every $100 spent up to a core rebate of $3000 on any new car. The downside is that these points may only valid for five years. If you wont use them in that time limit, your money on this card is virtually useless.

If you’re in the market for a new credit card, it is essential that you are honest with yourself and determine what type of borrower you are. Understanding your financial income, spending habits and financial goals will allow you to find the card with the features to give you financial freedom and keep you out of debt!

How about you all? What category of spender are you? Does the type of credit card you have (or are looking for) match you spending category?

Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • @ The Habitual Spender – This is the type of spender that truly befuddles me. Why do we feel that it is all right to spend money that we don’t have (and don’t intend to have any time soon) on consumer purchases? If any one out there can share any insight, that’d be great!
  • I would definitely say that I am in the Everyday Spender category. I use my cash-back credit cards for all of my daily purchases, but always pay them off in full each month. Since I pay off my balances in full each month, I don’t really care what the APR is.
  • With all credit cards (and for all categories of spenders), it is important to avoid credit cards that require that you pay an annual fee. I feel these are big rip offs.

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