How to choose the right credit card for your family expenses

Overwhelmed by credit card choices? You are not alone. The good news is that if you are organized and intentional about your choices, reward cards really can pay off.

3 steps to try

1. Evaluate the introductory rate and the regular rate. Remember
that the lowest advertised rate usually goes to those with the very
best credit.

2. Investigate rewards. Will you actually use them? Are
they easy to redeem? Does their value outweigh annual fees and
potentially higher interest rates?

3. Check the fees. Annual fees are just the beginning.
Make sure you understand over-limit and late payment
penalties-because we all make mistakes.

In order to reap those benefits, you will need to charge a lot and pay the full balance at the end of the month.

To avoid overspending, you need to keep track of all that spending. Although you may be checking your balance online, it is easy to track your “real” balance in a spreadsheet or old-fashioned check register by subtracting the credit card purchases. Keep your receipts and record them once a week. That way when your credit card statement arrives, you have the money to pay it in full, sitting comfortably in your account.

What is right for the family next door is not necessarily going to work for yours. The key to real reward card success is choosing a card that fits your lifestyle, habits and family needs. Will you actually use the benefits? Don’t get a Disney card if you can’t stand crowds, and don’t bother with a card that only rewards gas purchases if you drive a Prius.

Web designer Martin McClellan and his wife Christine use a cash reward card that pays 6 percent back on groceries. With a 2-year-old son, trips through the food and baby aisles add up. “We use it for all of our daily expenses and pay it off each month,” says McClellan. “In five months of use we’ve made about $300 cash back.”

Watch out for offers that come from processing centers, rather than the major credit card companies. Unsolicited pre-approved offers may be tempting, but hit the Internet to compare cards before you sign the easy application.

4 major types of rewards

Travel: Accumulate miles and/or hotel stays based on purchases. Cards that award miles for flight purchases are great for frequent flyers. Those that award miles on routine household purchases like gas and groceries can result in free airfare quickly.

Merchandise/Services: These rewards can be significant if you choose a card that offers reward products or services your family actually uses.

Balance Transfer: Transferring a balance from a card with interest to one that offers a 0% grace period is a great strategy for getting debt under control. Just make sure you can pay off the balance before high rate post-trial period kick in.

Cash Back: These cards reward holders back in cash (usually statement credit) for all or certain types of purchases. A card that offers 2% cash back nets you $20 for every $1,000 spent. It doesn’t take too many trips through the food and diaper aisles to accumulate that free money.

Little known perks

A recent MSN Money article listed these valuable “secret” perks of many credit cards:

• Auto rental collision damage waiver that covers your personal insurance deductible as well as towing charges.

• Extended warranty to double original manufacturer’s repair warranty, up to one year.

• Purchase protection in case your new stuff is damaged or stolen within 90 days of purchase.

• Lost luggage reimbursement that can cover the cost of luggage and its contents.

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