The average American has 3.5 credit cards, according to Experian, and many of us have several more than that. So how do you decide which one to pull out when you're at the cash register? If you always reach for the same card out of habit, you could be cheating yourself out of perks and benefits. Worse yet, choosing the wrong card could even cause your credit score to dip.
WalletPop consulted with Gerri Detweiler, a personal finance expert at Credit.com, to get a rundown of what you should keep in mind when you're making a purchase to help determine which card to pull out of your wallet.No Balance. First of all, if you have some cards on which you're carrying a revolving balance, your initial choice should be for a card with no balance. Here's the reason: If you charge a purchase on a card that already has a balance on it, the interest for that purchase will start accruing immediately. If you don't have a balance, you'll be able to "float" that purchase -- and any subsequent purchases made that month -- interest-free, until the bill is due.
Low Interest. If you're going to charge your purchase on a card that carries a balance, reach for the card that offers the lowest APR. You'll be able to pay it off more quickly, especially if you planned ahead for a big purchase by applying for a card that has a low or 0%-teaser rate. (Just make sure you've paid it off by the end of the promo period!)
Low Utilization. All other things being equal, choose the card that isn't as close to being maxed-out. The FICO scoring model takes into account how much of your available credit you've used on each card, so if you use a card that's close to its limit, your score could suffer. This article offers more details about how your utilization is calculated and how high is too high.
Reward Benefits. If you don't carry a credit card balance and have little utilization, you can choose your card based on perks. A good place to start is with your cards' reward programs. Before you buy, check your rewards' balance. If you're close to the number of miles or points you need to redeem something like a statement credit or an airline ticket, use that card. As this article points out, card issuers switch up their reward promotions frequently, so it pays to check what's currently being offered before hitting the mall or shopping online.
Price Protection. Even if you've shopped around, you might be tempted to kick yourself if you find out the item you just bought was available somewhere else for less. If you're the type of person who won't sleep at night unless you got the best deal out there, reach for a card that offers you this type of coverage, especially for big-ticket purchases. Likewise, some cards will give you extra time to return an item if you're seized with buyer's remorse after the store's return policy expires. This is especially handy if you're shopping online and the item doesn't arrive in time for you to make a decision.
Warranty Protection. If you're buying electronics or computer equipment, research your cards' benefits programs to find out which ones offer you protection if the product arrives broken or dies a month after you get it. Some cards offer this protection, so you can skip the overpriced "extended warranty" the cashier pitches you at the time of purchase.
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