Set a basic budget on how much money you want to spend. Be realistic about the fact you won't be able to get the best of every feature, as you'll have to make tradeoffs.
Determine your experience level. Are you a novice or an expert when it comes to digital photography? If a novice, a point and shoot might suffice. Experts will want more manual control over the exposure process.
Consider what you will use your camera to capture. For kids or wildlife, get a camera that acts fast after you click the shutter
Decide if you want to capture video with the camera. If you want true HD capabilities, look for 1080 resolution video. If you want to catch close to professional or professional sound, look for a camera with microphone input
Make a list of which features are important to you, and prioritize the list. Keep in mind that there are tradeoffs, for example, size vs. optical zoom. You probably won't get everything you want.
Consider which type of batteries would be most useful to you. Your main options are either AA batteries or a rechargeable lithium battery pack. Rechargeable pack may be lighter and last longer, but when it wears out, it may be difficult to buy a replacement. If camera takes AA batteries, it can usually run on rechargeable AA batteries as well - these are not manufacturer specific and can be easily replaced when needed.
Try not to end up with a complete compromise camera. Decide what's important and get something best at that, rather than middle-of-the-road in everything.
Remember that megapixels do not equal good pictures. There are many other things, including the lens, that determine the quality of the image. 3 megapixels is the minimum you should look at. A 3 megapixel camera will get you excellent 4x6 prints, if you want anything bigger consider a 4 or 5 megapixel -or more if your budget will allow. Talk to a photo store professional for more information about how many megapixels you will need your camera to have to make a quality picture in the print size you want.
Narrow your search down to one or two models and shop around for the best price. Price comparison sites can be helpful but often the best price merchants have terrible service.
Make sure your camera has a warranty that you feel comfortable with. Most cameras come with a limited one year warranty, but extended warranties are usually available.
Buy the camera.
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