Choosing the right credit card may not occur to some people as a major issue that they need to look into. Instead, those people just find the first deal that appeals to them and apply accordingly. What they do not realize is that they may actually be causing their financial future serious harm by not thinking the application through properly. Are there better deals around? What is the APR, or interest rate? How might the repayment affect me if I happen to spend more on the card than I wanted to? All of these questions have to be asked and answered in order to find the right credit card for you in the short and long term.
There are ways and means of choosing the right credit card for you. In fact, you can actually achieve it in three easy steps, all of which are outlined below!
1. Firstly, decide on which type of card you actually want. The most popular are Visa and MasterCard because they can be used almost everywhere, whereas other types of card cannot. However, within the Visa and MasterCard range, there are many variations that you need to consider. For example, do you want a standard card or a gold or platinum one? If you earn less than 20,000 then you should be applying for a standard card anyway. Then there are the charity cards, offer cards, reward cards and various other types of card that are available, but this information should be disregarded. They will all have apparently good offers attached but the only thing that should really decide on is what general type of card that you want. The rest is simply packaging that means nothing because it is simply aimed at attracting consumers.
2. The second thing that you need to do is examine the interest rates. Credit cards so not have one staple rate that you have to adhere to and/or pay back. Instead, there is a vast array of interest rates, or APRs, available with the lowest for a credit card starting at around 10% and the going right up to 25%. The higher APRs are often hidden in the small print, but the cards with lower APRs advertise them so as to attract new custom. There will also be introductory offers so you may want to read the small print anyway to make sure that all interest rates actually last for the foreseeable future instead of for the first six months.
3. Tailor the card to your specific wants and needs. Do you want it for purchases or balance transfers? If it is the latter then you may want to narrow your search down to the top five cards in terms of APR and then examine the offers that are on. Some card companies offer 0% on balance transfers for a set period of time. If you have balance transfers then this could aid your quest to pay off all debts that you have. When that debt is gone then you still have a low APR just in case you do need to make a purchase at any given time.
Regardless of what you want or need a credit card for, when choosing the right one for you, you should always read the small print and make sure you are fully aware of what the card is offering you. This may help you to avoid problems further down the line in terms of debt.
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Not reading the fine print of the credit cards you use is a sure invitation to have your blood sucked. Now a days millions of people are using credit cards to make purchases. If you pay for anything with a credit card, then beware that the 9% interest rate you thought you were locked into could actually go as high as 30%, and you might not know it until you get slapped with the bill-retroactively.
"Penalty interest rate" and "universal default" are provisions included by banks in their credit card offers which they claim are necessary to offset risks. These provisions are legal as long as issuers can say they warned you. The rates and fees in these provisions are all out of proportion to the risks. Issuers have used better ways in the past to protect themselves. For example, they used to cut customers off after they hit their credit limits, which I think was a good thing for the user.
Now they let you keep spending so they can charge you over-limit fees (as much as $29 per billing period) and permanently higher rates. This can be devastating for the budget of many users. So be careful--always read and understand the fine print before it is too late.
Never pay your credit card bills late even by an hour as your interest rate can be increased permanently. In May 2004, according to the testimony by credit card issuers before the Senate banking committee, $14.8 billion (or 11% of their revenue) were collected on penalty rates --which averaged about 24% this year according to the Consumer Action. To make things worse for the user the new rates can be applied retroactively to purchases already made. Companies usually specify an exact time by which payments must be received. If they don't specify it, you should contact them to find out.
Be aware that even if your mortgage or other payment is late (under the "universal default") credit card issuers can raise your rates because you are now classified as high risk. One bank was found charging a 35% universal default rate by Consumer Action.
Having too many inquiries into your credit history can also trigger universal default rate and you may be charged a fee thus lowering your credit rating.
Credit card issuers made $7.7 billion on penalty fees in 2003. There is no legal cap on banks' interest rates. And the Supreme Court in 1996 prevented states from setting limits on late fees.
Legislations are underway to ban the "universal default" interest rates based on alleged missteps with another issuer, ensure that penalty fees match issuers' costs and ban over-limit fees. Whether this actually happens or not time will tell. But until then you have to be extra careful and read every fine print because it is all in there.
Both Wesley Atkins & Durre Qureshi 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.
Wesley Atkins has sinced written about articles on various topics from Credit Cards, Dieting and Skin Care. Make sure you only apply for the lowest APR Credit Cards on the market. All cards are listed at:
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