Before you start shopping for a credit card

In the hunt for a new credit card?

The first step is to check out your credit report.

When you apply for a credit card, one of the first things an issuer will do is pull a copy of your credit report. Credit card companies take a close look at your credit history when determining the size of your credit line, the interest rate you'll pay and whether you qualify for a card at all.

So before you start wading through card offers, it's best to get a copy of your credit report and check for any errors. If you find some, be sure to make the corrections before shopping for a new credit card. If you don't, you may end up with a card with a higher interest rate than you deserve.

For detailed advice on how to get your credit in order, check out Your Credit: The basics.

Step two is determining your credit profile. There are two basic kinds of credit card customers: people who pay off their bills every month like clockwork and those who carry balances.

A good card deal for someone who carries a balance might be a so-so card deal for someone who never pays a penny of interest. And that's why it's so important to shop according to your payment profile.

If you always pay your monthly bill(s) in full, the best type of card is one that has no annual fee and a solid grace period before finance charges are applied. With this card you've got convenience and you've got it cheaply. In simple terms, paying the entire balance every month saves you bundles.

If you carry a balance, you're looking for a card with no annual fee and the lowest possible interest rate you qualify for.

Whichever way you pay, it's important to check out a card's grace period. This is the time you have to pay in full before interest rates apply. It may be 25 days. It may be less. And is it the beginning of the 26th day or the end of it? Too trivial? Not if interest begins accruing and late charges are triggered.

Folks with no credit or severely damaged credit may want to consider applying for a secured card. With secured credit cards, a cardholder makes a savings deposit in exchange for a credit line.

Secured card credit lines are typically hundreds of dollars rather than thousands, so you don't run the risk of running up big balances at super-high interest rates. After a year of on-time payment, cardholders may be able to qualify for an unsecured card at a lower interest rate.

Because interest rates on credit cards available to people with damaged or little credit are so high, consumer experts urge people to pay off the cards every month.