Choosing a credit card

Used wisely, credit cards can help you make the most of your financial resources. You can use cards to make some purchases more easily and securely — like travel reservations or concert tickets — and they can even help you budget and save. But to enjoy these benefits, you need to choose a card that's right for you, and use it carefully.

The right credit card

To find the best card for you at the lowest cost, you need to consider these three major factors:

• Interest rate
• Grace period
• Annual fee

Not all cards charge an annual fee, so you may be able to avoid that cost entirely. But be sure to read the fine print: Some no-fee cards start charging a fee after the first few months.

A card's grace period and interest rate probably have the greatest effect on the cost of credit. A grace period is the number of days before a company starts charging interest on new purchases. If there's no balance due on your card, no interest will be charged from the statement closing date through the day payment is due. But if there's a balance, the grace period is eliminated. And some cards have no grace period, which means interest starts being charged on that purchase immediately.

If you pay your bill in full every month, having a grace period may mean you never pay interest. And the longer that period is, the easier it may be to pay in full each time. But if you regularly carry a balance, finding a card with a lower interest rate will be more important to you than finding one with a long grace period.