Get a better understanding of how credit cards work, including how to manage credit cards, in this free lesson.

Choosing a credit card

man holding credit card

If you are considering getting a credit card, shop around for the one that best fits your needs and that won't leave you struggling financially. Check with your local bank, evaluate offers you might get in the mail, visit the websites of major credit card companies, and check out other online resources.

Look for a card that has:

What do these terms mean?

Interest rates on credit cards change over time. Variable-rate cards are linked to changes in other interest rates such as the prime rate. Fixed-rate cards are not directly linked to changes in other interest rates.

An annual fee is an annual charge similar to a membership fee.

A grace period is a time—usually 25 days—during which you can pay your credit card bill without paying a finance charge. A grace period usually only applies if you pay your balance in full each month. It does not apply to cash advances or if you carry a balance forward.

You might also consider cards that offer extras for using them. Some cards offer cash back for purchases, frequent-flier miles, or Internet access. However, be careful. These cards may require you to make large purchases before you can take advantage of these incentives. Never base your credit card decision solely on possible incentives.

Make sure you totally understand a plan's terms before you accept the credit card.