Using the wrong credit card can cost you tons of money and even more frustration.
Get the right card in your hands, however, and it could be a ticket to affordable borrowing, free travel and great perks.
If you're still using the first credit card you got when you opened up your bank account, do a little research and put in a little effort – the payoff could be huge.
Here are five steps to help ensure you're putting the right card in your wallet:
1. Check your credit.
Before applying for a credit card, check your credit score and review your credit history. Your credit score will help you determine the likelihood of approval and what type of credit card you should be applying for.
If your credit score is low, your credit history will help you determine why and what you need to do to improve it.
For example, you may have a delinquent account, a charged off account, too much debt relative to your credit lines, etc. Clean up your file, watch your score go up.
2. Determine what genre of credit card suits your needs.
How you use a credit card will determine what kind of credit card best suits your needs. Not all cards are suited to all people.
If you tend to carry a balance, you will want to get a low-interest credit card. Options may include a card with a fixed low rate, a card with a low introductory low rate on new purchases or, if you already carry credit card debt, a balance transfer credit card.
If you pay down your credit card bill every month, you might as well get something out of it with a rewards credit card. Options include cash back, points and credit cards with miles.
3. Narrow down your selection.
Once you've determined what genre of credit card fits your pattern of use, you'll want to get the best card for your particular preferences and situation.
For example, if you're looking for a rewards credit card and you want to earn enough points for a free trip, take a look at some of the airline and travel credit cards. If you value simplicity and transparency, try cash back.
Likewise, for low-interest cards, focus on cards that match your situation.
If you carry a balance from time to time, maybe it makes sense to keep a no-fee, low-interest card in your wallet at all times.
If you have a balance on your credit card right now that you want to reduce, explore 0 percent balance transfer offers.
Many credit cards come with minimum income requirements. The richest rewards credit cards typically require six-figure incomes.
Double check your salary so you can focus on the cards you know you qualify for.
4. The devil is in the details.
This gets a little dicey. Credit card companies are notorious for super attractive offers that get less attractive when you read the fine print.
In the case of rewards cards, there are a few tricks to watch out for.
First, watch out for hefty welcome bonuses. While that 70,000-mile welcome bonus looks really attractive, make sure you can meet the minimum spend requirement in the allotted time period.
Sometimes they can require you spend as much as $9,000 in the first three months. Other times, there's only a first purchase requirement.
Second, beware of 5 to 10 percent cash back bonuses that look too good to be true.
You know banks can't make money giving out 5 percent cash back all day, every day. Something's got to give.
Check for earning/spending caps, tiers and bonuses that are restricted to specific merchant categories.
Other terms you'll want to understand are the rewards program's point expiry policy and minimum redemption requirements.
With respect to low-interest credit cards, promotional interest rate offers tend to catch consumers by surprise the most.
First of all, if you're late on one payment, you may lose your 0 percent rate, plus be charged interest from the time you first took out the card, so beware!
Check for the term of the promotional rate, the go-to rate after the offer expires, the penalty rate if you're late and the transfer rate, if you're transferring a balance.
5. Get the card offering the most value.
Finally, compare credit cards and get the card offering the most value to you.
If it's a rewards card, get a card that gives you the highest earn rate for where you spend your money.
Many cards offer bonus categories for purchases at restaurants, gas stations, grocery stores, pharmacies, online, etc. Match your spending patterns with a card that offers extra points in categories you use to maximize rewards.
Don't only focus on the earn rate. Consider the value of the welcome bonus, perks and the insurance coverage provided by the card.