Credit cards have become a part of everyday life for most people. Most of my friends have at least one credit card, and I know many people who have more than one. A recent survey commissioned by the Consumer Financial Protection Bureau (CFPB) found that 35% of people between the ages of 18 and 34, 65% of people between the ages of 35 and 54, and 63% of people ages 55 or older have a general purpose credit card.
With all the advantages offered by credit cards though, there also comes a great deal of risk. Credit cards are not all created equal. Different cards offer different interest rates, fees, benefits, etc. These are things that we as consumers need to watch out for when choosing a credit card.
Given how many people have credit cards, I would think that choosing one would be fairly easy. Before I make any significant purchase, I usually do my homework. For example, when I am buying a used book on Amazon.com I usually look at the seller’s ratings and read a few reviews. I look to see whether the seller usually delivers books on time, whether reviews are overwhelmingly positive or negative, whether the product arrives as expected, and so on.
BUT…
Choosing a credit card is hard. There is a lot of information out there, and it often seems like those credit card agreements contain their own unique language that looks a lot like the English you learned in school, but for some reason, it just does not make sense. This is supposing that most consumers take the time to read those size ten font agreements that make you cringe when you glance at them. I can usually feel a headache coming on from just looking at them.
The Denver Post recently published an article devoted to the topic of choosing a credit card: “Credit Card Tips: Guides to Choosing the Right Card.” The author refers readers to four websites devoted to the topic and stresses the importance of doing research before committing to a particular card as different cards have different interest rates and fee structures.
In response to concerns about transparency and fairness in the credit card industry, President Obama signed the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) into law in 2009. Additionally, the CFPB has published a glossary of many of the confusing terms included in credit card agreements.
The number one take-away from the various articles that I have read seems to be to do your own research and figure out what is best for you. The research I am talking about is research into your own spending habits. If you know how you have used credit cards in the past (For example: Do you always or never carry a balance on your card?), you can better choose a card that is tailored to your own needs. Because everyone’s spending habits are different, there is no one BEST card out there that suits everyone. So, think about how YOU use your credit card. There are many valuable resources that offer tips to understanding your current credit card statements, as well as any costs associated with switching credit cards. In my opinion, two of the best websites that are available to the public are the CFPB’s and the Federal Reserve’s sites. Both explain the current laws that govern credit card agreements. They also contain several useful links and interactive tools for helping consumers understand what works best for each person.
Although no one ever likes to hear that there is no one BEST credit card, the agency in charge of administering the new credit card rules is aware of the problem and working to effect change. You can watch a clip from one of the leading proponents of changing the credit card industry here.