It is a fact: not all credit cards are created equally. Some credit card providers charge annual fees, others offer low introductory rates, while some offer rewards every time that you use them. Confusing, isn’t it? We think so! With this in mind, SayEducate offers the following tips to help you navigate through the credit card maze.
When comparing credit card offers, even having a master’s degree in business administration will not ensure that you will understand every single offer. The language used by credit card providers is often confusing, even nonsensical with enough small print qualifiers to give anyone a headache.
So, why should you consider a new credit card in 2008? Well, if you have received you most recent credit card statements, it likely reflects the spending you did for Christmas. For some consumers, the shock of a January credit card statement can put them into a panic forcing them to scramble to find the money to pay their bill. Sure, making minimum monthly payments can buy you some time, but you know how that goes — you’ll never get the card completely paid off before the next important holiday or event comes up.
Comparing offers can get complicated, but the following should be considered whenever you apply for a new credit card:
Annual Fee — unless your credit isn’t good or excellent, then paying an annual fee makes no sense. Yes, American Express and some other elite cards will charge a fee, but these fees are usually offset by some special services including travel insurance, concierge services and the like.
Interest Rate — if you pay off your card every month, then it doesn’t matter what the interest rate is for you. For everyone carrying monthly balances, the lower your interest rate, the better. Lots of cards offer teaser balance transfer rates as low as 0% for the first three to twelve months, with a higher rate offered for new purchases.
Rewards — if you pay off your card monthly, then shopping for a card that offers rewards is the way to go. Some will give one or two percent cash back on your purchases, while others will allow you to accumulate points which you can redeem for gifts.
With any card you choose there are some things you should be aware of:
- What is the default rate on your card should you be late with a payment?
- If you run into a problem with an unrelated company (a dispute with the telephone company, for example) will your credit issue with that company automatically cause you to be charged the default rate?
- What fees are involved when transferring balances from one credit card to another one? Usually, that rate is as much as 3% of the balance, so do the math to see if transferring balances makes financial sense.
- Are you planning to apply for more than one card? If so, be careful! Multiple credit card applications can work against your creditworthiness. Your credit score can take a hit and impact the rate you pay for other loans.
- Make certain that you understand the terms of your consumer agreement. Most credit card providers reserve the right to change the terms of your agreement at any time — you could be in for a rude awakening when you suddenly realize that you are being charged a higher rate on balances!
Shopping for a new card means you should be very careful which card that you use. If the card you select doesn’t live up to your expectations, then contact the credit card provider and cancel it immediately. An unused card can work against you if it has been activated, but not canceled by you.
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