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Credit cards, like most other areas of finance, can be difficult to fully understand and compare because of the amount of small print hidden away in the credit agreement. Let's be honest - how many people even take the time to read it, let alone understand it and see how it will apply to the cost of using their cards? Not many do, and the credit card companies know this. By hiding away some 'features' in the small print, they can often squeeze a little more profit from their customers, usually without the cardholder knowing or caring.

However, once you know about some of the tricks they use, you'll be ahead of the game and will be able to make more efficient use of your card, with lower monthly bills and smaller charges to your account.

The first trick, the balance transfer fee, is now very well known, mainly because advertising regulations mean that if it's present it must feature prominently in marketing material. This fee is charged as a small percentage of any balance transfer you make onto the card, usually after being attracted by a 0% introductory deal or a low rate for life offer. Unfortunately, balance transfer fees are pretty much a fact of life for credit card users these days, and it's all but impossible to get a balance transfer card with no fee. The best you can aim for is to get the lowest percentage fee possible.

As well as being used for purchases, credit cards can also be used to obtain money from cash dispensers, a feature known as a cash advance. This area is a real money spinner for card issuers. Not only do they charge a higher rate of interest for money borrowed in this way, sometimes twice as high, they usually charge a fee of two to three per cent of the money you withdraw as well. Furthermore, there's usually no interest free grace period, and so you'll be paying interest on whatever you withdraw, even if you settle the balance in full at the next statement. In a final, somewhat sneaky move, card companies have started to widen their definitions of a cash advance. Some usages of your card such as paying for online gambling are now regarded as cash advances by some issuers, and charged accordingly.

Perhaps the most insidious form of 'hidden' charge comes under the slightly obscure name of Allocation of Payments. This system means that any repayments you make go towards repaying the lowest interest kind of debt on your account first, leaving the more expensive parts of your debt untouched. For an example, if you transfer a balance of $5000 onto a card at a lifetime rate of 5%, and then make a cash advance of $200 charged at 25%, then that $200 will sit in your account attracting the higher rate until you've completely cleared the $5000 balance transfer. None of your repayments will reduce the amount of your debt being charged at 25%. This means that the only effective way to use a balance transfer facility is to transfer the balance, and then never use the card again for any reason until you've cleared the debt.

The last trick that we'll look at is the reduction of minimum repayments. Once, the normal repayment you had to make each month was around 5% of your balance. Over the years, this has fallen to an average of 2.5%, meaning that a higher proportion of each repayment goes towards paying interest, and less towards reducing your debt. A minimum repayment of 2.5% is only marginally higher than that needed to service the interest charges, and will mean your debt will take years longer to clear than it should, costing much more in interest. Even if it's only by a small amount, you should always try to pay more than the minimum required each month.

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Credit cards are an easy way to immediate gratification to spend and buy with money you don't have and it often forces many to run into debt and even bankruptcy. It is therefore crucial to weigh the pros and cons before filling out any old application for a credit card - which I receive almost daily in my mail LOL (:--).

There are several factors which should be considered before applying - I've tried to outline them below but please keep in mind this is a short list to serve as a guideline only:

1. Every time when you apply for credit of any kind or a credit card, a mark is made against your credit rating. The available credit on the card you have is applied to your overall debt ratio - even if you don't have a single dollar balance on it !! Can you believe that !

2. Some credit cards give points when you purchase nearly anything. These points can be used for further shopping and other great bonuses, Air Miles for example. Hence, if you're a frequent flyer you should look for credit cards that offer rewards that will be a benefit to you. The points earned by you come in handy for future hotels and flights.

3. Look for credit cards, which offer standard APR and low introductory rates for balance transfers.

4. Some credit cards award you cash back for purchasing at certain stores. Therefore, apply for a card which awards cash back at stores where you actually shop or it won't be worth it.

5. Accountability: In my own situation I've made myself accountable to my wife for large purchases so as to not let my emotions get the best of me. There will always be another super sale!

6. Checks and Balances: Come up with your own plan for dealing with debt before you apply. This will be something you can look back on if you run up a debt on the card.

Tie this in with #5 above so that if you do begin to run a debt balance you'll be able to pay it off soon. The majority of credit card holders run a large balance and for many this would be dealt with if they had an accountability partner to work through the debt with.

7. One benefit of credit cards is that if you continually make your payments it looks really good to on your credit statement and may actually help your overall score.

If you're still set on getting a card here are some guidelines to help you choose a reliable company.

1. Interest rates: Your most important factor to consider while managing credit card debt. Choose a low interest rate credit card and only after reading all terms and conditions.

Of course you'll be way happier to just pay it off each month but like most you might run a balance here or there and high rate cards can bite you if you do.

2. Annual fees: Most credit cards now do not require any annual fee, this being driven by competition. Try for a credit card company which does not charge any annual fees. Although I've found in personal experience that if you're wanting the bonuses and points plans there will be a fee in many cases.

3. Withdrawals or Cash advances: Though handy in certain situations this can sometimes be way too tempting and ring up your debt faster than you'd like.

4. Loyalty Schemes or Reward points: Cash back rewards and Air miles are used to attract you the customers. Many people chose a specific credit card for these kinds of benefits. Be cautious while buying credit card with these benefits.

5. Insurance: Choose a credit card with insurance, which will cover you from any theft or burglary. If you are a frequent traveler then choose a card which provides you free travel insurance.

6. Gold and Platinum cards: These might look great in your purse or wallet but often they are not the most competitive cards in the market. Annual charges are also applied to these types of cards. So don't decide on designs and colors of cards. Just see their benefits and compare from there.

7. Conduct an online comparison: There are many types of online survey's and comparison reports that have been conducted. Try doing a google.com search on the term "credit card reviews".

Of course the above is not an exhaustive list but should put you in the right direction if this is your first time applying for a credit card.

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About Author

Both Michael D. Strauss & Chad Mcdonald are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Michael D. Strauss has sinced written about articles on various topics from Credit Cards, A Secured Loan and Finances. Michael writes for comparison site Card Sense, where you can get up to date information on products including the. Michael D. Strauss's top article generates over 165000 views. to your Favourites.

Chad Mcdonald has sinced written about articles on various topics from Careers and Job Hunting, Injury Claims and Education Toys. Submitted by Chad McDonald to remove or find

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