With so many different types of credit cards out there today, how do you know which one is right for you? In a nutshell, the best credit card for you depends on your personal credit habits. Let’s take a closer look:

If you are a convenience user, you pay your balance off in full each month. For you, interest rates are not a huge priority, since you don’t keep a revolving balance. In your case, it is best to find a no-fee card, which should be quite easy to find, since many cards available today have no annual fees attached.

If you are a credit user, you often carry a balance from month to month. You may even only make the minimum payment required each month. In your case, interest rates are very important: you need to find the lowest rate possible (10-13% is a good range). Also, be careful when it comes to cards that tempt you with ultra-low introductory rates, since they nearly always jump up to very high rates once the introductory period (usually a few months) ends. Unless you can pay off the balance before the rate goes up, you might want to steer clear of these cards!

If you are a combination user, you generally pay off the balance in full at least 50% of the time, and the rest of the time you pay off any balance carried in several months’ time at most. Which type of card is best for you? It depends! Take a look at your statements and see how much you paid in interest over the last year. Compare that to what you paid for your annual fee. If the difference between interest paid and the annual fee is small, there’s a good chance you can cut your costs signficantly by simply switching to a card with a similar interest rate and no annual fee. If you can find a card with an even lower interest rate and no annual fee, that’s even better still!

What about incentive cards?
Some types of cards offer incentives, such as airmiles, in exchange for an annual fee. These annual fees can get quite pricey, but if you can benefit from the rewards/incentives offered, can be worth it. Using an airmiles incentive card as n example, if it takes you 3 years of accumulating points on the card to get one free flight, and the annual fee is $100, unless that free flight is worth well over $300, consider passing on the incentive card.

Help! My card is “maxed”!
“ Maxed”, which is slang for maximum or maximized, ironically means “to make the most of or best use of”. However, if your credit card is “maxed”, and can only make the minimum payment each month, you are definitely NOT making the most of your card. This situation calls for drastic measures: you need to take serious stock of your finances, budget very carefully, and work very hard to eliminate this high interest debt as quickly as possible. Check your credit report carefully to ensure that proper adjustments have been made by your creditors.

Credit Card Savvy
Despite the fact that credit cards are misused and relied upon far too heavily by many, they do have terrific advantages when used properly. Credit cards can be extremely useful when it comes to convenience, e-commerce, online banking, theft protection, consumer insurance, and building a good credit profile. Here are some tips on how to use your card(s) effectively without falling into unaffordable debt:

• Pay your balance in full. Think of your credit card balance as you would rent. If you didn’t have enough money to pay your rent, would you send your landlord 2% of what you owed and tell him to charge you 16% interest on the rest? Definitely not! The moment you start carrying a balance is when the interest charges start ticking. By paying off your card in full each month, you won’t have to pay any interest. If this is difficult for you to do, consider getting an American Express or a similar card that requires the full balance to be paid each month. This may come at a price, through high annual fees, but will keep you from accumulating even higher interest payments.

• Use one card only. By having just one credit card, you can more easily track your purchases. It’s also a lot easier to pay one bill rather than three or four! Also, if you can’t fit all of your credit card spending on one card, that’s a sign that you are probably spending too much.

• Set spending limits. Take a few moments to crunch some numbers and figure out exactly how much money you can realistically afford to pay on credit card debt at the end of each month. Once you have this number, commit to yourself not to exceed it. After all, you wouldn’t want to end up paying more in interest than an actual item cost you to begin with, would you?

• Choose the right card(s) based on your spending habits. As previously mentioned, different cards offer different options, so make sure you choose one that suits you best. If you tend to carry a balance each month, choose a card with a fixed low interest rate. If you frequently buy valuable electronic or computer equipment, consider a card with extra warranty protection.

• Shop online. Studies show that people tend to make far fewer impulse purchases online, in part because they cannot touch, smell, hear, or feel products when shopping online. Shopping online also allows you to more easily comparison shop and keep a closer watch of what you are spending.

• Monitor your statement for inaccuracies or fraudulent activity. Imagine working so hard, paying off all of your debt each month, only to have to pay for mistakes or someone else's charges. Keep track of your charges each month, then when your statement arrives, check your records against activities showing on the statement. Report any discrepancies to your creditor immediately.