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Easy Money: Score a Smarter Credit Card

I confess: I have never put more than five minutes into picking a credit card. I chose one of my cards because it offered free shipping on any L.L. Bean product (now you know one of my minor shopping addictions). The other two -- one for business, one that's personal -- simply came with my bank accounts.

Who can blame me? I may write about personal finance for a living, but it's a full-time job like anyone else's -- plus I have a 2-year-old. The last thing I want to do with my nine minutes of spare time is wade through a million articles and offers to find a more perfect card.

Fortunately, that little mortgage meltdown and the resulting credit crisis a few months ago have bestowed a few favors on ordinary consumers like you and me. Namely, there has been a push to end the sneaky policies some credit card companies employ -- like flotillas of hidden fees and upping your interest rate before you can say, "Visa." Even better, a growing number of consumer groups have been focusing on helping people navigate the crazy world of credit cards to find the best deals.

I don't advise getting a new card for the heck of it; every time you open a new account your credit score takes a small hit. This is the case even when you're just trading in your Discover card for an American Express one, for example, and the number of accounts you have stays the same. But if you're dissatisfied with the card you currently use -- or if your lifestyle has changed and your old card doesn't deliver much value -- now is the time to hook up with a piece of plastic that fits your needs. Here, a no-sweat guide to finding the right card for your wallet.

Step One: Face Facts

Choosing the best card begins by acknowledging a simple fact about your financial life: You are either the type to pay off your card balance in full each time you're billed, or you carry an ongoing balance and make payments towards it from month-to-month (hopefully more than the minimum).

If you're a balance carrier -- even if it's the kind of balance you swear will be gone by July, but somehow it sticks around like baby weight -- the smartest card for you is one with no yearly fee, and the lowest possible interest rate for the longest period of time. Be realistic: A zero-interest card for a year may sound like a deal, but those months fly by -- and if you haven't put aside the money to pay the balance at the end of the promotional period, you'll be in deeper debt. And rolling over your balance to yet another account becomes a shell game that may cost you big in the long run (especially if you take it as an interest-free excuse to go shopping).

Rewards and points and frequent flyer miles are also enticing. But cards that offer those perks tend to have higher interest rates and often charge a yearly fee. You might charge enough each month to think that you can reap terrific rewards, but if you carry a balance, the interest rate you'll pay on what you owe is likely to cancel out any gains, and possibly even set you further back.

For example, let's say the balance on your card always seems to hover around $4,000, and it happens to be a rewards card with an interest rate of 16.9 percent and a yearly fee of $50. Keeping that card, with that balance, will cost you roughly $700 a year. If you also charge (and pay back) another $4,000 in gas and groceries on that same card -- because you love the generous 3 percent cash back deal -- you would only earn about $120. Bottom line: You still lose about $580.

Step Two: Pick a Card

Balance carrying parents have several good low-interest cards to choose from. According to survey last fall by Consumers Union, the not-for-profit publisher of Consumer Reports, the top three no-fee, low-APR cards include Capital One Platinum Premium Prestige (about 7.9 percent), Clear from American Express (10.9 to 14.9 percent) and IberiaBank Visa Classic (4.0-6.0 percent).

For families who don't carry a balance -- and who want the juiciest rewards cards -- the Chase Freedom Visa offers 3 percent cash back on purchases in the top three categories where you spend the most (e.g. gas, groceries, Target) when you spend up to $600 per month. Purchases above that $600 cap yield 1 percent cash back. Let's say you charge the $600 limit each month: you would get 3 percent or $18 back per month, or about $216 per year.

Another option is the Capital One No Hassle Cash Rewards Card, which gives you 2 percent back on gas and groceries only (and 1 percent cash back on other categories), but there is no cap on what you can spend. It's a like a small-but-steady rebate on two household basics.

Still, there are a few caveats you should know when it comes to any type of credit card. First, terms can change at any point, including between when I wrote this and when you read it. And deals may differ, depending on your credit history. If you know you or your partner have great credit -- which means you have a FICO score of 700 or more -- don't hesitate to call a company and negotiate the best possible terms. Ask for a lower interest rate, for example, or see if the company will waive the yearly fee. The rewards programs themselves may not offer much flexibility. Although my personal belief is, once you have the customer service rep on the phone, and your moxie is up, go ahead and ask.

Finally, some devilish cards won't reveal the exact interest rate you will end up with in their offering materials. They may skip that detail or provide a range -- and then send you the card, sticking you with a rate you may not like. Don't sign on for a card until you know the precise interest rate and credit limit they'll give you. Getting the best credit card for your needs doesn't have to require a lot of homework. But making one swift toll-free phone call -- to double-check the interest rate, determine exactly how rewards are applied and redeemed ("In chocolate, at Easter!" is a red flag you don't want to hear) and to inquire about hidden fees -- will pay you back in peace of mind. And your bottom line will be happier too.

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