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Tips for choosing a credit card in 2011

By Lucy Lazarony · Bankrate.com
Thursday, January 6, 2011
Posted: 1 pm ET

Will you be shopping for a new credit card in 2011? These tips will help you choose a card that's right for your credit and your spending habits.

Let your credit score be your guide. When shopping for a new credit card, be sure to stick to cards that are suitable for your level of credit.

Apply for cards beyond your credit reach and you risk needless dings to your credit score. And scuffing up your credit is no way to kick off the New Year.

So before applying for a new credit card, be sure take a peek at your credit score. You can estimate your credit score using Bankrate's FICO score estimator. For the best results, answer the questions using a recent copy of your credit report.

Once you have an estimate of your credit score, shop for a credit card that matches your level of credit. Bankrate.com makes this easy to do by allowing you to search for cards based on four credit categories: excellent, good, average and bad credit.

Consider your credit card balance. Are you dealing with lingering credit card debt? You may want to consider a card with a low-rate balance transfer offer. Snapping up a card with a super-low rate on balance transfers could help you save some serious cash on finance charges in the New Year. Just be sure to factor in the cost of balance transfer fees, typically 3 percent or 4 percent of the transferred balance. 

Take extra care when attempting to transfer larger balances.

If you carry an occasional credit card balance, you'll want to choose a card with the lowest annual percentage rate that fits your credit.

Look at the introductory rate. Do you have some big purchases planned for the New Year that will take several months to pay off? You may want to consider a credit card that provides a rock-bottom introductory rate on new purchases. Cards with low-rate introductory periods of a year or more are available. That way you'll pay next to nothing in finance charges as you pay down your balance.

Reap the rewards. Do you pay off your credit card each month like clockwork? You might want to opt for a card that provides some nifty rewards.

Cash-back cards, cards linked to specific rewards, such as rebates on gas or travel, and cards that let you choose from a variety of rewards are all available.

Be sure to consider the cost of an annual fee before signing up for a rewards card. Many rewards cards do not charge annual fees but some do, especially travel cards linked with a specific airline.

Find out about fees. If you're new to credit or have damaged credit, the credit cards that are available to you will tend to have higher interest rates. Finding a card with reasonable fees should be your primary concern. So take a close look at a card's annual fee. Is it $39 or $59, or somewhere in-between? Try to avoid cards that charge an application or processing fee.

Need some additional help pinpointing the best kind of credit card for you? This Bankrate.com calculator will help to steer you in the right direction.

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