In today’s economy, credit cards are a necessary evil — it’s difficult to book a hotel, rent a car or buy a gift online without one.

But not all credit cards are created equal and the plethora of plastic options can leave you scratching your head when it’s time to choose the right card for you.

Marie-France Lettre, communications officer with the Financial Consumer Agency of Canada and an expert on credit cards, said the “golden rule” of credit cards is to remember they are a convenient method of payment and not the source of funds.

“(Credit cards) shouldn’t compensate for a lack of liquidity in your bank account,” Lettre told CTV’s Canada AM on Tuesday.

A slew of catchy incentive programs including travel rewards, health perks, gas points and new charitable options can make the task of finding the right card even more challenging.

“It can be very overwhelming for consumers to choose the best one for them,” Lettre said.

In an effort to help shoppers tailor a card to match their unique spending habits, the Consumer Agency of Canada has devised an online interactive tool that narrows down more than two hundred card options to a small handful.

The tool prompts Internet users to answer a few simple questions, such as whether they prefer to pay a small annual fee, have a low interest rate, purchase an insurance plan or enjoy student benefits for example.

Shopping for the right card is just as important as what you buy, Lettre said.

What to consider

One of the most important factors to consider when shopping for a card is whether you typically carry an unpaid balance from month-to-month, she said.

If you do, you shouldn’t get too excited about incentive programs, Lettre said.

Cards with juicy reward programs tend to have higher interest rates. Carrying a rollover balance on these cards could cost more in exchange for a few extra points.

Make sure the rewards outweigh — or at least cover — the extra costs, Lettre said.

Beyond Air Miles

Credit card reward programs have come a long way in recent years. Consumers can earn a lot more than just air travel deals. Some health programs allow holders to redeem points at their next eye exam for example.

Other cards can be used toward large purchases such as vehicles or everyday expenses such as gas and groceries.

An incentive program should not encourage you to change your shopping habits. Never go out of your way to earn points, Lettre said.

Charitable cards are also becoming more common. Some donation plans give a small amount — like $0.10 — from every purchase to charity, while others offer to make cash donations in exchange for points. Research the list of available charities before you commit to one card, Lettre said.

“Everything that is related to reward programs should be up to the consumer and you need to shop around.”

Read the fine print

Tread carefully when considering popular cash-back credit cards, Lettre said. Cash-back cards handover a small portion of spending back to card owner, usually at year’s end. However, many of these cards are associated with annual fees and higher interest rates. Furthermore, many cards-back cards have a ceiling rebate amount. And some payouts only kick-in when a certain dollar value has been spent per transaction or on an annual basis.

You risk spending more with cash-back cards, Lettre said. “You realize, ‘I’ve put myself into debt, I’m paying more interest, I’m paying more annual fees all for a cash-back that I can’t really get.’”

Be careful when using prepaid credit cards as well, Lettre said. These cards are popular among young people and are loaded with a predetermined amount of money. These cards can come with catches including hefty activation fees, reloading fees and charges at each transaction.

Doing the research isn’t always fun but it will save you money in the end, Lettre said.

“Make sure you read the terms and conditions of your contract because it is your responsibility,” Lettre said.

Building credit

Signing up for several cards and deciding which to use later isn’t the best option either. Points are deducted from your credit score each time you apply for credit. Lenders, such as mortgage brokers, review card applications and a high number of requests may reflect badly on your ability to manage debt, Lettre said.

Also, don’t cancel a trusty card with a good rate just to get a new one, if you can help it. The longer you keep a healthy credit card account active, the better it reflects on your credit score.

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Lawmaker Announces Plan to Stop Credit Predators on College Campuses

It’s a common sight on college campuses: Credit card companies offering deals to students to get them to sign up for a new credit card.

But many first-time borrowers don’t know what their getting into, and often get stuck with interest rates and credit card bills they can’t afford.

Now, State Senator Thomas Gaffey is introducing a bill that would restrict access for lenders on campus. The restrictions, Gaffey says are needed to protect students from lenders, who often prey on the naivety of college students.

Gaffey plans to introduce the bill in January.

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All of us use credit cards on a daily basis whether it is for personal use or for business. Credit cards have become a daily part of our life and we cannot imagine living without a credit card.

While having a credit card is a necessity in today’s life, we have to be responsible on how we use it and pay off each month. The credit line we get on our credit card should be considered a loan that needs to be paid off each month, not a loan that we can pay interest on. Credit card interest rates are usually much higher than other loans after the expiration of introductory periods. In addition, the introductory rates come with a lot of strings that need to be reviewed carefully as a violation of these conditions can lead to a much higher interest rates, some as high as 21% APR.

Credit cards also offer a lot of benefits in terms of cash back and rewards. So, how should one go about choosing a credit card? First of all it is useful to understand your spending patterns i.e. where do you use the credit card most. Some examples include:

1. Airfare: Purchasing of airfare tickets
2. Gasoline: Purchasing of gas for your vehicles
3. Business: Do you use credit cards for business purchases like hotel, food, inventory etc.
4. Groceries: Do you use credit cards for your grocery purchases including wholesale like Costco, Sams Club etc.
5. Student: Are you a student and have low to no income?
6. Entertainment: Do you use credit cards for hotels, restaurants etc.

Understanding these spending patterns can help you decide which cards rewards programs will benefit you most.

Once you figure this out, the next step is to understand the credit card offers. Most credit cards come with the following offers:

1. Introductory APR: This is the interest rate that credit card company charges you when you get a new credit card. Typically you will get 0% APR for a 6 month period.
2. Regular APR: This is the interest rate you will pay on outstanding balances once the introductory period is over.
3. Balance Transfers: Does the credit card allow you to transfer balances from your other credit cards?
4. Annual Fee: These are the fees that you have to pay every year to keep the card and avail its rewards programs. Most cards have $0 or low annual fee for the first year.
5. Credit Needed: To get low APR offers or to get approved you will need to verify the credit needed on the card. Getting denied on your application can affect your credit score negatively.
6. Rewards: Most credit cards offer rewards in terms of cash back, airline points, gas points, hotel points etc. Determine which rewards are most important to you before you apply.