more articles

How do you find the card that's best for you?

Applying for a credit card can seem confusing because there are so many kinds to choose from: low interest cards, balance transfer cards, instant approval, and pre-approved and pre-paid credit cards. Which one is right for you? The kind of credit card you choose depends on what you need the credit for and what your current financial situation is. So, the first credit card shopping tip is: shop around. Be sure you get the best terms and conditions for your credit card, and be sure you understand them.

All credit cards involve terms, conditions, fees and charges for the right to borrow. It's important to check these out before you accept that credit card:

• Annual Percentage Rate: Known as the APR, this is how much it costs you on a yearly rate to borrow money. As well, each month, the balance that you owe on your card contains a periodic rate, which is the amount of interest you owe for that one-month billing period. Sometimes the APR is variable, and your rate may change depending on economic factors. You should know what kind of interest your new card carries.
  
  
• Card fees: almost every card charges fees. Most charge an annual user fee, which can range from as low as $25 each year to several hundreds of dollars each year. In addition, some cards will charge you for cash advances or for exceeding your credit limit. Some cards charge a monthly fee whether or not you use the card. It's important to know what fees your new card will cost you.
  
  
• Calculation of monthly interest fees: even if you think that you've gotten a good APR, how interest is calculated on any outstanding balance on your credit card each month can dramatically affect how much you'll pay out in fees. Most cards calculate finance charges according to an average daily balance, but the best method for you is an adjusted balance that subtracts your current payments from your outstanding balance before applying finance charges. It's important to understand whether your card will apply finance charges on top of finance charges—this can get very expensive.

How finance charges are calculated is probably the most important thing for you to consider and fully understand about your new credit card to ensure you get the maximum benefit and pay the least possible to use credit. But, here are some final considerations:

• Is there a grace period (often 14 to 30 days) before finance charges begin to add up? Not all cards have this.
  
  
• Do you plan to pay off the balance every month?
  
  
• Is the credit limit high enough for your needs?
  
  
• Is the card accepted in enough places for it to be useful?
  
  

Finally, credit is serious business and your credit is your responsibility. Keep your cards safe. Hold on to all your purchase receipts and reconcile your statements each month. Limit the number of credit cards you own and use.

Top | More Topics

Share This Article

| | | | |