Are You Using the Right Credit Card?

Credit cards come in many different varieties. Choosing which one is best for you can be a major headache...

Do you want rewards, money back, miles on your favorite airline or maybe just a lower interest rate? What about a debit/credit card that dips right into your bank account — which limits what you can spend, but means interest free shopping?

Finding the right card can be confusing. How can you figure out what you need. Which are the best offers... and which are the worst?

Fortunately, there are ways to cut through the clutter. The Financial Consumer Agency of Canada (FCAC) has a handy credit card information section on its Web site.

In the US, the Federal Reserve's Consumer's Guide to Credit Cards also has easy to understand, consumer focused information including an interactive tool which discusses different credit cards, asks you questions and then suggests some credit cards that might "fit the bill".

While these tools can help narrow your options, it's important for you to determine your needs before you choose a card. Also, make sure you read the fine print before you sign. Make sure you know whether the interest rate is permanent and fixed — or if it will go up. How are the fees determined and can you get customer service to help if you run into problems?

Here are four tips that can help you choose the right credit card:

• KNOW YOUR NEEDS AND WANTS. How much can you afford to put on a credit card? Will you be able to pay your balance in full each month? Would you benefit from reward programs? Are you prepared to pay an annual fee?

• PICK THE CREDIT CARD THAT SUITS YOU BEST. There are different types of credit cards on the market, with different interest rates and fees (low-rate, standard, student, retail or charge cards).

• SHOP AROUND. Don't take the first card offered to you. There may be a better card for you, one that will fit your financial habits and needs.

• UNDERSTAND ALL THE TERMS AND CONDITIONS. Before you make your final choice, make sure you understand all the terms and conditions of using the card, including the interest rate and what fees are charged. Don't hesitate to ask questions about anything you don't understand.

Credit cards do seem to be a necessary evil in this modern economy, but do your best to pay all bills on a monthly basis. Always pay more than the minimum... even if it's only a dollar or two more. Besides lowering your balance quicker, this improves your credit score. Look at the Credit Union option. These cards often have lower spending limits, but also offer better service and lower interest.