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Credit cards can either help you out or ruin your life. This is why choosing the right plastic is an important task which shouldn’t be underestimated. Picking the right one involves understanding of how credit cards work, shopping around and comparing and finally selecting “the winners”.

There are several types of different credit cards out there, each one comes with it’s different benefits and drawbacks.

Travel and Entertainment Cards. These have to be paid in full every billing period. They usually don’t have a predetermined limit. Examples: Diners club.

Bank Credit Cards. MasterCard, Visa, Discover are all examples of a bank credit card. Your bank will define your credit limit according to your credit profile. You will have minimum payments per month, finance charges and some of them will come with benefits, such as cash-back or gift points, depending on your bank.

Retail Store Credit Cards. Macy’s, Sears and others are retail store cards which you can only use to shop in the retailer’s network. You will have minimum payments per month, finance charges and fees, which differ from store to store.

When choosing a plastic, determine what do you want to use that card for. If you are planning on just making regular purchases, look for the one with the lowest purchase APR. If you want to take cash advances, you need a card with a good cash advance APR and lower cash advance fees. If you are planning on transferring balances, look for a card that offers a good balance transfer APR.

Important things to consider when selecting a card: Check the method for computing the balance for purchases (average daily balance is the one that you are looking for). Check for annual, monthly, transfer and other annoying fees. Fees are important, they can bury you. Don’t apply for too many cards. Check online and compare. Try to find cards with a long introductory rate, fixed APR and 24/7 customer service plus online bill pay. Stick with the big players that have more branches in your area.

To keep yourself out of trouble, you must pay your bills on time. Pay as much as you can and keep your balances low. Don’t rely on credit cards for everything and be careful when shopping - these are money that you will have to return. Educate yourself on how to use credit cards and stay out of the debt hole.

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