There is a lot of information nowadays about credit card perks. It seems that everybody go crazy about credit cards. They are popular, they are convenient and they are lucrative. This is what the majority think about credit cards. But do not get fooled and paint the picture in bright colors. There are underlying potential problems and every card holder should know them. This is a short review. 1.The "universal default" clause that is becoming an integral part of every credit card agreement. What is it? A credit card issuer can automatically raise your interest rate (even if you are on time with the regular payments and even if you are among owners of ) in case you are late on other payments such as telephone bills, mortgage or another credit card. Or if the bank thinks you have taken on too much debt. 2.A credit card bank can apply any interest rate it wants. Even if you live in a state where there is an interest rate cap, a bank obeys the interest rate caps of the state it is chartered in. So, if you live in Minnesota where the maximum interest rate is 18%, a bank based for example in Utah, such as American Express, will charge you any interest rate it wishes because there is no interest rate cap in Utah. 3.A credit card issuer can charge you even if you are an hour late with your regular payment. And there is no limit to that as there is no limit to increasing the interest rate. After a 1996 legal case of Smiley vs. Citibank late payment fees increased from $5 to $50. And who knows what will happen in future? 4.Read the fine print. It is very important to read information in fine print of your credit card application. Not many people really do. Even consumer advocates and some credit cards executives admitted that the last time they read their credit card agreement was years ago. Which is more, these agreements are difficult to understand. Many credit cards users are not aware of the fact that a bank can change APR at any time, for any reason as long as they give a 15 days' notice. 5.Bankruptcy. Credit card debt. This is a nightmare of many Americans. But it is quite curious that bankruptcy is not usually a result of spending sprees. It is more connected to medical problems, divorce or job loss. Those, who face any of these problems, turn to credit cards as the alternative source of income. But if they do not find any other way of getting money they would very soon end up with a huge revolving debt. 6.Credit cards users are inattentive to their accounts. Many people apply only the minimum payment on their credit card debt. This strategy is totally wrong, because paying the required minimum you will never pay off your balance. Which is more the debt will increase, percentage rate will rise. Thus you will end up paying much more for the goods and services than you expected. So, you need to think carefully before applying for a credit card, but do not be afraid. You only need to think rationally and be attentive. For, really, credit cards can offer so many benefits and turn out to be so much fun.
Just as there is no best credit card for everyone, there's no single one that stands out as the worst, or one to avoid. It's all about finding the one that fits your needs and your circumstances. It may be easy to say 'avoid any credit card that has an APR above x%' - but there are people out there who need a card and can only qualify for one with a high APR. If one doesn't compare credit cards based on APR or annual fee, then how does one determine which are best avoided?
Rather than putting together a list of credit cards to avoid, it's far more profitable to pay attention to a list of do's and don'ts that will help you select the best for your circumstances and situation.
1.Know yourself. There are some very good comparison websites where you'll find guides to selecting the best credit card for your spending and money management style. In general, if you tend to pay your accounts in full each month, apply for a card that offers you rewards for using it on things you'll purchase anyway. If you tend to carry balances on your account, pay attention to the APR and avoid those with high APR's and late fees that kick in with a vengeance.
2.Know the credit cards you're applying for. Do your homework before you make applications. Take the time to read cardholder agreements so that you know all the fees, penalties and conditions to which you're agreeing. In particular, look for the following - all of which have to be outlined in the card member agreement:
-Annual fees or participation fees which will be charged to your new card. You'll be liable for the first year's fees even if you never use the card.
-The APR (annual percentage rate) is the interest rate that will be charged on your outstanding balance. The agreement must also disclose whether the rate is fixed or variable, and if it's variable when and how often it can be changed, and how much notice they're required to give you.
-Transaction fees for particular transactions, like cash advances, may be additional. Those need to be listed in the agreement.
-Any monthly fees for your card. Some credit card companies charge a monthly fee whether or not you use the card.
-The method used to compute the interest on your balance can make a big difference in the fees that you're charged. Knowing how and when those fees are computed can save you a considerable amount of money.
3.Avoid 'fake' credit cards. Be sure to read all the information about the options you're considering carefully. There are some offers that imply that you'll get a major credit card with a large spending limit - but the card that you actually get is only valid if you purchase items from their catalog or online merchants. You'll pay a premium price for a limited number of products at high interest rates - and in most cases, you'll pay a high annual membership fee and monthly participation fee which you'll be billed for even if you never use the card.
When you're looking for the best credit card, make sure you take the time compare all the options before making your applications.
Both Vanessa Dotson & Jon Francis 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.
Vanessa Dotson has sinced written about articles on various topics from Credit Cards. Vanessa Dotson is a financial analyst and author of articles on . She covers a great variety of topics. Among them: credit card. Vanessa Dotson's top article generates over 4400 views. to your Favourites.
Jon Francis has sinced written about articles on various topics from Credit Cards, Credit Cards Benefits and Credit Cards. Jon Francis has been involved with finance for many years! With an in-depth knowledge of the market help helps others get the best from a. Jon Francis's top article generates over 90500 views. to your Favourites.