A University of Alabama Law School Clinical Program funded in part by West Alabama Regional Commission

1. Selecting a Card

Don't have too many cards

For the consumer who wants the convenience of a credit card but without financial bondage, it is a good idea not to have too many cards. One or two major credit cards are usually enough. Having too many cards invites overspending - exactly what the lenders have in mind - and may give you greater exposure to loss, theft and fraud.

Keep in mind that credit card companies make money from interest. They are looking for consumers that will charge and maintain large balances. If you are receiving a lot of solicitations, or card issuers are raising your limits without a request, do not think of it as a compliment. The companies are simply hoping you will run up higher balances and pay them more interest.

The extremely low introductory rates that are such a big part of card issuers’ marketing approach are intended to reel you in for the higher rates that will soon follow. This approach must work for them or we would stop seeing it. Look at the permanent rate.

People with good credit have good choices.

If you have a good credit history, you do not have to wait for whatever offers come in the mail. Financial magazines and newspapers often list card issuers with the best deals for different types of consumers. Know what terms are best for you and look for a card that will meet your needs. You may find a better deal than any that shows up in your mail.

Whatever your approach, remember that you are making a contract. Decide what terms are important: if you carry a balance from month to month the interest rate may be critical; if you pay off the balance monthly, then grace period, billing cycle and annual fees may be more important. As with any contract you enter into, its terms should satisfy you. Search out the billing cycle, permanent interest rate, what happens in the event of a dispute over a debt, the grace period, and all other terms and conditions. The most important provisions for the consumer may be the hardest to find. Be wary of a card that has a lot of complex provisions; you can be sure they are not there to save you money.

If you do accept a card and later discover features you do not like, pay it off and cancel it. This is a competitive market and you can find a card that suits you.

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