Before You Choose A Credit Card
All of us receive credit card offers each week in our mailbox. With all those offers which one is best? The answer is - the credit card that best meets your needs?
If your card selection process is based on picking the first one that looks pretty, or offers you a big credit limit, and you assume that all card offers are the same - it could cost you money!
The right choice could potentially save you not hundreds but possibly thousands of dollars. This is why you should take your time in selecting a credit card for your needs.
Before filling out any application for a credit card make sure you read the fine print and can answer the following questions and how they pertain to your needs. All these questions should be in the disclosure statement include with the application.
What Kind of Card Is It?
There are many types of cards on the market - thousands and thousands actually. It's important you understand the kind of card you will be applying for so you make the right decision to meet your needs.
- Standard Credit Cards - revolving balance, set credit limit, minimum payments
- Premium Credit Cards - additional benefits like rewards, points, etc above what a standard card offers
- Charge Card - Balance must be paid in full every month
- Limited Purpose Cards - usable only a specific locations
- Prepaid Credit Cards - cardholder may put money in the account before using the card
- Business Credit Cards - Designed for business use giving business owners the ability to keep business and personal expenses separate
Planned Use for the Credit Card?
As you can see from above their are cards to meet a variety of needs. How you use the credit card can and should determine which card fits your needs best. If you plan on paying the balance off each month a charge card may be best for your needs.
If you're looking to consolidate some debt and lower your interest a card which allows for balance transfer may be the better choice. The current best value on balance transfer is the Chase Visa® Platinum Card.
If you know you'll be carrying a balance from month to month a credit card with a low interest rate is a must!
What's the APR - Annual Percentage Rate?
The APR or the annual percentage rate is the percentage rate applied to balances you carry. The higher the APR, the more you will pay in finance charges if you do not pay the balance off each month.
Make sure you know the APR it is vital. Most credit cards today will have different APR for balance transfers, purchases and cash advances. Both the Chase Visa® Platinum Card and the Chase FreedomSM Credit Card meet the needs of many consumers in this area.
Length of Grace Period
Before a finance charge is added to your monthly bill or statement a grace period is usually given to pay the bill in full. The time period normally is a set amount of days from the billing date like 28 days for the billing date.
Extended grace periods do help give you more time to pay the bill in full without incurring more expenses for using credit.
However, if you already carry a credit card with a balance your new purchases may not have any grace period.
If you already have a balance on the credit card, new purchases may not have a grace period.
Know The Fees!
Frees on your credit card and really rack up some numbers. You need to know what the fees are, the fee amounts and under what conditions they are charged.
The most common types of credit card fees include:
- Finance Charges
- Balance Transfer Fee
- Cash Advance Fee
- Application Fee
- Late Fee
- Over Limit Fee
- Returned Check Fee
Requesting a statement can also add a fee to your bill. Recently I asked for a statement and was charged $7.00 for them to mail me a new statement. A statement that the credit card company got wrong in an address change. Their mistake! I've since closed that account!
Calculation of Finance Charges
Credit card companies calculate the finances charges in many ways and those charges can carry a big impact on the bottom line payment. Some companies only consider the current month's balance others include past balances and other may not include new purchases.
The most common way credit card companies calculate the finance charges is the average daily balance and the double billing cycle. The average daily balance is the least expensive of the two methods.
Your Credit Limit!
The credit limit plain and simple is your purchasing power. Many people have found themselves in trouble running up a high balance. If you are new to the world of credit cards - start with a low limit until you have developed good responsible habits in using your credit card and build a good credit history.
Watch out for No-Limit cards depending on when and what you are purchasing they can report inflated numbers on your credit score. In return your credit score can get pounded.
Rewards - Benefits - Points
Many credit cards today offer some type of rewards or points for using your credit card to make purchases. Make sure you have a complete understanding of the reward program and how it is structured. The rewards or points can vary depending on the amount of purchase and where you purchased the items.
Whatever credit card you choose make sure you fully understand the uses and benefits it provides.
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