If you’ve ever sat through an ad by a major credit card company, you may be wondering how to choose a credit card. Because credit companies compete for business, each card offers some benefit the others don’t. They also each have their downsides. It can be easy to give into temptation and misuse credit cards or worry that you will if you get one.

Think of a credit card like a forklift. If you get in the driver’s seat when you don’t know what you’re doing, you can do a whole lot of damage. On the other hand, you’ve got just as much power to build as you do to destroy. Don’t get the impression that credit cards are evil. They aren’t. The cards themselves are really just tools. It’s all about understanding how and when to use them.

How to Choose a Credit Card

It’s important to make sure you understand the concept of credit before learning how to choose a credit card. If you understand how to wield credit cards, you’ll not only avoid the dangers that they pose you’ll also open new doors that wouldn’t be open to you otherwise. Independent of income, people at every social strata will need to use credit sooner or later. But credit isn’t something you’re automatically given. It’s something that you’ll need to build up month by month, or rather billing cycle by billing cycle.

To give yourself the credit that you need to survive in the world, you need to follow one simple rule: Do all you can to pay off the full balance of the card every cycle. If you pay only the minimum, then interest is being added to the amount you owe. This rate of interest may be high or low depending on the terms outlined in the agreement with the bank or company that issued you the card.

When learning how to choose a credit card, you’ll also learn that credit has an outsized impact in our world because it allows us to pay for those things that we want, but more importantly, the things we need. You won’t be putting down plastic to purchase a house, but the way you use your card is going to have an enormous impact on how expensive the house is for you.

Almost everyone pays for a mortgage by taking out a loan. The terms of that loan are decided by the bank or mortgage lender. They decide at what rate to lend you the money, meaning how much you have to pay in interest on the loan you’re receiving. That decision is based on your credit history, and your credit history is largely determined by how you’ve used your credit cards.

How is that fair, you ask? Why should the bank get to charge you more or less just because of the way you use your credit cards? Well, consider that lenders need to understand what sort of risk you are. If they look at your history and think you might often miss payments, then they’ll charge you a higher rate of interest to compensate for the higher level of risk they’re taking on.

With this in mind, the credit card you choose and how you use it can have a huge impact on your future. That’s why it’s so important to be informed. We’ll talk more about understanding your needs below, but first, let’s look at how to learn more about the state of your credit.

Before learning how to choose a credit, it’s important to check your credit first. Every person has a credit score even if they’ve never had a credit card before. The way you use credit cards is a significant factor in determining your score, but there are other factors too. There are three credit bureaus which will each give you your FICO score. These are Experian, Equifax, and TransUnion. The higher the score, the better your credit.

If you’ve got unpaid bills or late payments on your car or other purchases you’ve made on credit, then your score may suffer. Rebuilding it will take time, but if you pay your bills and reduce your outstanding debt gradually, then you will see your score go up.  The scores vary some from bureau to bureau, but in general, you should aim to have a score of 700 or better.

The score alone might not give you much insight into the state of your credit, which is why getting a credit report is helpful here. The report breaks down your financial history so you can see where the score comes from. Look over this report carefully because if you find a mistake, then you can report it to the credit bureau. Your score will improve if you do.

You’re entitled to a credit report each year. However, this report won’t have your score on it. To get your score for free, you can go to NerdWallet.com.

The landscape of credit card offers may be confusing if you’ve never shopped around for a card before. You’re probably being bombarded by offers from every angle. Credit card mailers arrive in the mail. TV spokespeople eager tell you all about how the card they use carries 0% APR for the first year. This card entices you with talk of points. Another card tells you that you’ll earn rewards.

So what does all this mean? Don’t get too carried away with the promises of any offer until you understand what you stand to gain from each offer. Credit card companies have their own terminology, and until you learn the lingo, you’ll have a hard time sorting the smart deals from rotten ones.

APR stands for annual percentage rate. Some rates may be advertised at zero, but beware, this is probably a temporary introduction rate. Interest is how credit companies generate revenue, so they’ll find a way to make money somehow.

Maybe you’re already familiar with how to build credit. You’ve had a card or two already, and now you’re ready to branch out and see what the credit card market has to offer a responsible financial planner like yourself.

You’re looking to maximize returns and pick the best card available. If this is the case, you need to decide what matters to you. Are you most concerned with a low interest rate, earning reward points, or getting cash back on your purchases? The best cards offer some combination of these benefits, but there’s no single card that’s better than all the others hands-down.

A secure card is different from other credit cards because it’s backed by a deposit you put down when you sign up. The advantage of the card is that it’s easy to get even if you don’t have an extensive credit history. However, you won’t build credit with most of these because your payment history doesn’t reach the three credit bureaus that determine your score.

The limit on the amount of debt you’re allowed to put on the card per month is determined by your trustworthiness as a borrower. If you’ve been steadily using a card for some time, you can ask the lender to raise the limit. This can improve your score. If you’ve got a high credit limit, but you maintain a relatively low balance from month to month, then this is a good way to build up your credit.

If this is your priority, don’t be surprised if the rewards only come when you use the card often. Credit card companies hold out travel miles, cash back, and other extras, but there is often a catch. Look out for an annual fee you’ll be expected to pay once a year on top of your regular balance.

Credit companies want to keep your business once they have it. This means you can start out with one card and upgrade to another that offers more of the features you’re looking for. Once you’ve had the card for a while, you can apply for a better card that offers more points, lower rates of interest, etc.

This might be harder to answer than you think. Most cards offer an introductory rate for the first year or 18 months. After the introductory rate expires, the rate of interest you pay could double. Remember to check the fine print to learn what the rate will become when the trial period is over.

Make sure you understand all the fees you’ll be expected to pay. Besides interest payments, many cards also charge a fee once annually for using the card. Not all cards carry an annual fee, but the ones that do usually offer other incentives to encourage you to use it. If the value of the points you receive or the points you earn is greater than the fee, then the annual fee is worth it.

Hopefully, you now have a better understanding of how to choose a credit card. If you’re ever unsure, the best thing you can do for yourself is to ask a lot of questions. No one is born understanding how credit cards work, so don’t be afraid to seek more information.