|
How To Choose Wisely A Credit Card
By: Stefan Everaet
So, you've made the decision to apply for a credit card. It's an important step
for any consumer. Whether this is your first application in an effort to
establish your credit, an addition to your existing credit card portfolio, or a
plan to re-establish unsatisfactory credit, it is critical to research and fully
understand the plans associated with various types of credit cards.
Before beginning the research process, consider and decide how you will use your
new credit card. Will you be using the card for everyday purchases, or will you
be taking an exotic vacation? Do you plan to pay the balance in full each month,
or do you prefer to make monthly payments? Since APRs (annual percentage rates)
vary for each card and respective payment plan, it's important to make these
types of decisions before the credit card selection and application process.
Obtaining credit is not free, but can be economical and less costly if you
understand the finance charges (the cost you pay for using a credit card). Grace
periods may help reduce certain finance charges, depending on the individual
credit card company offer. A grace period is the number of days you are given to
pay your credit card balance in full before you are charged a finance charge. In
most cases, finance charges are applied to new purchases only. (Cash advance
finance charges are usually imposed immediately following the advance.)
Familiarize yourself with the annual percentage rate. An annual percentage rate
represents the interest rate associated with using your credit card for
purchases and cash advances. The APR is often a determining factor for many
consumers when selecting and applying for a credit card. Credit card companies
may vary their APRs, offering a different rate for purchases, cash advances,
introductory periods and penalties. Traditionally, purchases carry the lowest
APR. An exception may be an introductory APR for new purchases or balance
transfers that may be offered at 0% for qualified applicants.
Many credit card companies competing for your business may offer a lower
introductory APR of 0% for a specified period, for example, six months. At the
end of this specified period, the APR will change to a pre-determined APR. (This
information will be included in the credit card offer.) Therefore, it's very
important to understand the APR following the introductory rate period,
particularly if you will be using the card for large purchases and/or balance
transfers. Also look for companies offering 0% interest on balance transfers
with no time limit. Cash advances usually carry a slightly higher APR than
purchases, but will vary for each credit card company.
An annual fee is another cost associated with using a credit card. Many think of
annual fees in this way, the greater the APR, the lesser the annual fee. While
this may be true in some cases, these fees are typically charged annually and
usually will be subject to finance charges. Some special credit card offers,
such as unsecured or unlimited credit card types and lines, may impose a higher
annual fee.
In addition to a possible annual fee, many credit card companies impose charges
through other fees such as late payment penalties, over limit fees and cash
advance fees.
With the growing competition amongst credit card providers, new plans such as
rewards and points programs are offered as incentives. These programs may offer
earned 'points' or privileges for consumer items, travel (vacations and frequent
flier miles) and other premium services, but oftentimes impose an enrollment
participation fee in addition to any annual credit card fee. If you are a
frequent traveler, these special programs and incentives may appeal to your
taste.
When reviewing each credit card offer, look for the specific information
outlined here to best determine the most appropriate card type and plan for your
needs. You may elect to use a comparison chart of your own when considering
credit card programs to more carefully select the best offer. Using the
categories listed above (APR, finance charge, grace period, annual fee, etc.)
create a left-hand column containing specific information about each category.
Then, create a column for each credit card offer you are considering. This
method will afford you a side-by-side, line item comparison to assist you in
making a final decision.
About the Author:
Do you want a new credit card but can't choose? Don't panic!
abc-of-credit-cards.com gives you all the basic information you need to know
before applying for a credit card. For more info visit:
www.abc-of-credit-cards.com |
