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Credit Card Use - The most important step in choosing a credit card is thinking about how you will use it. If you expect to pay your monthly bill in full, and other features such as frequent flyer miles don't interest you, your best choice is probably a card that has no annual fee and offers a long grace period. If you carry over a balance from month to month, you may be more interested in a card that carries a lower interest rate (stated as an annual percentage rate, or APR). If you expect to use your card to get cash advances then you will want to look for a card that carries a lower APR and lower fees on cash advances. Some cards may charge a higher APR for cash advances than for purchases.

APRs - The annual percentage rate or APR is the way of indicating the interest rate you will pay if you carry over a balance, take out a cash advance, or transfer a balance from another credit card. A credit card may have several APRs: One APR for purchases, another for cash advances, and another for balance transfers. The APRs for cash advances and balance transfers often are higher than the APR for purchases. Tiered APRs represent different rates that are applied to different levels of the outstanding balance. A penalty APR is when the APR may increase if you are late in making payments. An introductory APR is often temporary and a different rate will apply after the introductory rate expires. A different rate will apply in the future if you choose a delayed APR. If you carry over a part of your credit balance from month to month, even a small difference in the APR can make a big difference in how much you will pay over a year.

Fixed and Variable APRs - Some credit cards are "fixed rate" or simply and state that the APR doesn't change, or at least doesn't change very often. Even the APR on a "fixed rate" credit card can change over time. However, the credit card company must notify you before increasing the fixed APR. Some credit cards are "variable rate" in that the APR changes occasionally. The rate is usually tied to another interest rate, such as the national prime rate or the Treasury bill rate. If the prime rate changes, the rate on your card could change and you may pay more. Look for information on the credit card application and in the credit card agreement to see how often your card's APR may change on an annual or monthly basis.

Grace Periods - The grace period is the number of days you have to pay your bill in full without triggering a finance charge or penalty. For example, the credit card company may say that you have 30 days from the statement date, provided you paid your previous balance in full by the due date. The statement date is typically given on the monthly bill. The grace period typically applies only to new purchases. Also, most credit cards do not give a grace period for cash advances and balance transfers. Instead, interest charges start immediately. It is important to learn how the finance charge on your credit card is calculated.

Minimum Finance Charges - The finance charge is the dollar amount you pay to use a company's credit. The amount depends in part on your outstanding card balance and the APR. Finance charges can be calculated over one billing cycle or two, using the adjusted balance, the average daily balance, or the previous balance. Most credit cards have a minimum finance charge. You'll probably be charged that minimum even if the calculated amount of your finance charge is less. A minimum finance charge usually applies only when you must pay a finance charge and that is when you carry over a credit card balance from one billing period to the next.

Hidden Fees - Almost all credit cards charge fees under certain circumstances. Annual fees are common (sometimes billed monthly). Some have a fee charged when you use the card for a cash advance. This may be a flat fee or a percentage of the cash advance. A balance transfer fee is commonly charged when you transfer a balance from another credit card. Your existing credit card company may send you checks to pay off the new card. The balance is then transferred when you use one of these checks to pay the amount due on the other card. Late payment fees are charged if your payment is received after the due date. Over the credit limit fees are charged if you go over your stated credit limit. A set up fee is charged when a new credit card account is opened. A return item fee is often charged if you pay your bill by check and the check is returned for non-sufficient funds.