by Julie Wood

Created on: March 08, 2009   Last Updated: December 10, 2009

Credit cards, when used correctly, can be a great tool for managing your spending. The right card will allow you to save money, through cash back promotions, earn rewards, and offer you protection through charge back provisions and insurance.

When choosing a new credit card, it is important to keep in mind your spending and usage habits. Compare the features and terms of a number of cards to find the deal that suits your situation best. Each individual card agreement will be subject to different terms and conditions. This means that fees, interest rates and spending limits will differ from card to card. Make sure you fully understand the contract before you enter into it.

To decide which card is the best fit for your circumstances, take an inventory of your needs and requirements.Take a good look at how you will use the card and how you will repay the money you spend.

1. Do you need to make a substantial balance transfer from a high rate card? Before making a balance transfer, look at the Balance Transfer Fees carefully. Check whether they are based on a percentage of the amount you transfer, a flat rate fee, or both. These fees can make an otherwise attractive deal into a very costly deal.

2. Are you making a number of small balance transfers from multiple cards? Again a full understanding of the fee structure is essential. Often there is a minimum fee that has to be paid regardless of how small the transfer is. If you are consolidating a number of small balances onto one lower rate card, the charges can quickly add up. When deciding whether to transfer your balance, never look only at the rate of interest, it can be very misleading. Adding in the fees will give you a better appreciation of the true cost of a transfer.

3. Are you looking for a card that earns rewards through points or cash back? If you spend regularly and charge enough on your credit card, air miles or hotel points can become a great bonus. However, pay close attention to the rate that the points accrue at, and at any restrictions to redeeming them. If you are a frequent traveler already and a member of a rewards program that you have had a good experience with, then a card tied to that club can be very useful.

4. Do you intend to use your card for both balance transfers and ongoing spending? Many cards offer different rates for balance transfers than they do for regular charges. If you are using the card to transfer high interest balances, then obviously looking at the rate applied to balance

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