Credit card offers come by the hundreds and it seems as though our mailboxes are always stocked with at least one offer per week. While many people find preapproved credit cards as a sign of their good credit standing, it could actually be a sign of trouble. Finding the right type of credit card depends a lot on your financial situation.
Examine Your Goals
The best way to understand what features of a credit card are priority is to examine your life stage and goals for the future. If you are just starting out in life, chances are you have very little credit history. Having no, or a limited, credit history can actually be worse for credit card shopping than someone out of bankruptcy or debt negotiation. The reason is that you are considered a high risk borrower, which means that creditors will tend to offer card with unfavorable terms. Your goal at this point in life should be establishing a long-term, positive credit history. The best way to do that is to look for a card with a lower spending limit, which will also come with a better interest rate than a higher limit. Maintaining a manageable balance over a period of one to two years can build a strong credit history that prepares you for the next phase of your financial life.
Once you have established a credit history, your goals really depend on one thing; whether or not you are considered a risky borrower. If you have had little trouble with default in the past and a strong credit standing, you are likely to find a higher limit card with a good interest rate. At this point, you may find it best to seek out a card that offer cash back or a bonus point system for your purchases. Here you can maintain your current track record while also earning some freebies. On the other hand, if your established credit standing is poor or marked with periods of debt trouble your priorities will be different. You should prioritizing rebuilding your credit and working to rewrite your credit history. A person in this position should essentially follow the same procedures as someone without credit, find a lower limit card with a decent interest rate. Maintain a manageable balance with timely payments until your credit score has improved before taking on multiple lines of credit or secured debt credit.