5 things you need to know when choosing a credit card

( NewsNation ) — The average credit card balance for Americans is $6,329, according to the Federal Reserve, and high interest rates can make it tough to pay off.

But avoiding debt can start with choosing the right piece of plastic for your financial situation.

Here are five things to consider when selecting a new credit card.

Credit score

Choosing a credit card begins with having a high enough credit score to be approved. The strength of your credit can increase or decrease your options.

Credit card companies have varying thresholds for credit scores, and most of the top ones require at least good credit. Experian, one of the three major credit bureaus, defines good credit as a score of 670 to 739.

However, there are some cards for people who have no credit or a short credit history.

Types of credit cards

There are many types of credit cards. They include cards with rewards benefits for things like travel and shopping, cash-back cards to earn money back on purchases, low-interest cards, balance transfer cards and more.

Secured credit cards are a good option for people with no credit history or a low credit score. They require a small cash deposit to secure the credit. Putting down an initial $500 deposit, for example, in exchange for the same amount of credit is an option under secured credit cards.

Business credit cards are good for people (or companies) who want to keep personal finances separate from employment-related expenses.

Balance transfer

Some people choose to open a new credit card to transfer the balance from another card to help manage their monthly interest.

Many credit cards offer long introductory periods of no interest on balance transfers. This can help you pay off your existing balance while avoiding high interest rates.

Be sure to keep track of when the no-interest offer expires, and make monthly payments on time.

Keep in mind that most balance transfers require a fee, which is a percentage of the total you’re transferring.

APR and fees

The annual percentage rate (APR) is the amount charged on unpaid monthly balances. The higher the APR, the more you’re paying in interest.

Some credit cards offer a low introductory APR that expires after some time and then will go up dramatically. Read the fine print to know if the APR you’re signing up for is the APR you’ll get in the long run.

Some cards charge an annual fee, while others don’t. Consider the perks that come with cards that charge annual fees. Are there rewards, and will they benefit your lifestyle?

Rewards

Many credit cards offer a rewards program, including cash back, points, miles and more.

Do you travel a lot? Consider a card that offers miles for every amount spent. Do you spend a lot on dining or groceries? Look at cards that offer perks for those categories.

The bottom line is that you should do research before signing up for a new credit card, read the fine print and be cautious of overspending and missing monthly payments.

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