Not all credit cards are created equal. If you are looking to get a new credit card or transfer a balance, there are some factors you should consider before committing.
This is one the most important ways you need to compare cards. The annual percentage rate is the rate which you will pay yearly. Be aware of introductory rates and when they end and what the rate is after the introduction is over. Consider if you think you will be able to pay off the card before the introductory rate is over or not.
Also keep in mind if you use your money for different purposes such as cash advances, these often incur a high interest rate.
You need to be aware also if the interest rate is fixed or variable, if they rate will remain the same or if it is dependent on the prime rate. Make sure to read the fine print of everything before you sign.
Billing Cycle and Grace Period
Make note of when the billing cycle ends and when you start paying interest on any purchases. For example if you have a 55 day interest free period it often means the billing cycle is 55 days, so if you buy something two days before the end of the billing cycle you will still get charged interest if you don’t pay it off before the two days is over. It is not 55 days from the date of purchase.
Most credit cards have annual fees, which may not be a bad thing if you are getting something that benefits you. For example if you are paying a fee and getting travel miles out of the card it may be worth it. However always make sure you compare the fees between cards and what you are getting for the fee you pay. And if there is no fee investigate if the interest rate is higher to compensate. Also make sure of the fees associated with taking cash advances or other services the card might provide.
Special Offers and Expiry Dates
Most credit cards will offer introductory offers for your interest rates, cash advances or balance transfers. Make sure you know when these offers expire as after they do the normal rates and fees will apply. Once again, it is important to read the fine print and ensure you know when and what fees apply.
Minimums and Penalties
Credit cards have minimum payments which you will need to meet each month. It will be either a flat fee or a percentage of the balance. If you do not pay the minimum you will charged a penalty fee. If you do not think you meet the minimum it may be wise not to go ahead with the credit card or consider another option.
Points or Rewards
As mentioned above, lots of card offer points or rewards for usage. They might have a fee or no fee, however once you make sure you have the best deal on the basics you should see what kind of extras you can receive in terms of points or rewards, just be sure not to let this be your decision maker when comparing cards.
You should always find a card that fits your needs and many cards are tailored to suit students, travellers, shoppers, business people etc. Consider these cards but be just as aware of the fees and interest rates. For example a card for students might have no annual fee and a low limit but may have a higher interest rate, and a card for shoppers may have a high limit and high annual fee but low interest rate.
The bottom line is that there are many cards to choose from and using the above criteria can help you compare the available cards to find one suitable for your needs.
If you have any questions regarding a card make sure you speak up before you sign and read the fine print so you do not end up with a contract you cannot get out of and don’t want.
Source: Yahoo Finance