How to Choose the Right Credit Card
The mail arrives and once again you receive a credit card offer. The number of offers you receive each week may be fewer than what you received before the 2008 financial collapse, but if your mail is any indication, you’re receiving more offers this year than last.
If you’re not shopping for a new credit card, then immediately take your offer and put it through the shredder. Don’t throw it in the trash — someone might find your application, fill it out, change your address to their own and start racking up charges in your name with your approved credit card. Identity theft is a topic for another article, but it is something that you should always be mindful of.
Are you considering a new credit card? If so, the following tips can help you find the card that is right for you:
1. Balance Transfers — Likely, you’ve seen balance transfer offers with your new credit card applications. These offers typically allow you to transfer your current credit card balances to a new card for a fee of 3 or 4 percent of the balance transferred. You’ll be charged a low introductory rate that will reset to a higher rate later on. A balance transfer can work, but you need to determine if the fees charged are worth the transfer cost.
2. Fees — Unless you’re getting a new card with no annual fee, you might be paying $39 or more per year for the privilege of using that card. Other fees charged include fees for activation, participation, monthly maintenance and more. You can avoid all fees by shopping for cards that don’t sack you with fees. That means reading the fine print of every credit card offer to determine what you’re getting yourself in to.
3. Grace Periods — Most credit cards offer a “grace period” before interest rate is charged. Typically, you’ll be given up to 25 days after receiving the credit card statement to pay off the balance in full without incurring interest rate charges. Without a grace period, you’ll be charged interest the moment you make your purchase. Avoid these type of cards at all costs!
4. Interest Rates — The annual percentage rate or APR represents the interest you’ll pay on credit card balances. Rates can vary widely from less than 5 percent to 35 percent or more. The rate you pay will have no bearing on you if you pay your balances off every month. Familiarize yourself with the periodic rate that determines your monthly finance charge if you don’t pay off your balances every month.
5. Computation Methods — How your credit card issuer computes balances can have a large impact on you if you run monthly balances. If your interest is compounded daily you’ll pay more than interest that is compounded monthly. Avoid this problem completely by paying off your balance every month.
Credit card issuers are required by the FTC to disclose the information mentioned here by law. Be mindful of scams too as crooks and cheats are always looking for ways to deprive you of your financial livelihood.