What Credit Cards Do You Need?

THIS year alone, anyone with a zip code in a middle class neighborhood could get in the mail as many as 10 invitations to sign for different credit cards. But few people really need more than one or two. Keeping your credit cards to a minimum helps check impulse spending and reduces your risk if the cards are lost or stolen.

If you do not do considerable driving or traveling, you probably can get by with just one card. Your best bet would be a bank credit card, such as Visa or MasterCard.

If you travel extensively or run up a large expense account, you need a travel and entertainment card, such as American Express, Diners Club or Carte Blanche. Such cards do not have any spending limits. By contrast, the credit line on a bank card can be dented quickly by an airline ticket and a few nights in a hotel. So before you sign up for any card, be sure you will not be cramped by a credit limit that is too low.

Be careful of appeals to sign up for the premium gold cards. Annual fees may run from $15 to $25. You do get some extras with prestige plastic often higher credit limits, more generous check cashing privileges and nonfee traveler's checks. But you may find that you do not make much use of the added attractions. In that case, you are just paying extra for snob appeal.

At the other end of the spectrum, a few banks still offer cards with no annual fee.. The association also sells for $1.50 a separate list of banks charging the lowest interest rates.

Money magazine also features a list of banks that offer low interest rates in the monthly Investor's Scorecard section. The banks are located in various states, which means that you can go outside your home state for your credit card if you wish. There is nothing wrong with that. Indeed, the advantage is yours for there is a great variety of a rate among the nation's banks. Recently, they ranged from about 11% to more than 20%.

If you choose to shop locally or wait for solicitations in the mail, you should have no trouble determining the costs of a credit card. The kind of card you pick should be determined by your payment habits. If you run up big bills and don't pay them right away, by all means look for a card with the lowest interest rate. But if you pay off your bills promptly each month, pick one with no annual fee.

Quite a few credit cards now entitle you to a host of extras. Check closely before signing up for these cards. If the issuer is not charging you for the extras directly, you will probably pay for them through hefty annual fees and interest rates.

If you are in the market for a new card, here are some of the enhancements you can expect to find:

Most cards issue you checks, which you can fill out and use even at many stores that do not honor credit cards. But unlike most card purchases, you are charged for interest payments on the credit card checks as soon as they clear the banks.

In general, big city banks offer the most perks. For example, through Citicorp you can get $20 worth of credits with every $100 you charge. You can apply the credits to one of a dozen or so household products in a catalogue that the bank mails to cardholders four times a year.

Many banks are issuing MasterCard and Visa as so called debit cards. They look like credit cards, but they are not. With credit cards, you receive a bill every month for whatever you have charged. Then it is up to you to pay it. With a debit card, payments are taken automatically from your checking or savings account. They are transferred to the retailer's account as soon as his copy of your charge reaches the bank.

So if you choose to use a debit card, you should keep track of all your purchases with it. In fact, you should be as meticulous with your debit card records as you are with your checkbook. And if your debit card is lost or stolen, be aware that you may well have greater liability for unauthorized charges on it than you would with a credit card.