There are literally hundreds - possibly thousands - of credit card offers available to consumers these days. So how do you choose the best one? What should you look for in a credit card? How can you be sure that you won’t get stuck with high interest rates or a rewards program that doesn’t exactly live up to your expectations? In this article, we’ll take your through the major elements of a credit card so that you know what to look for and can make an informed decision about which credit card to choose.
Interest Rate
The first thing that most people look for is the interest rate. Also known as APR (annual percentage rate), this is essentially a percentage that is charged to you, the consumer, if you do not pay your credit card bills on time. APRs change frequently, but once you apply for and receive a credit card you will have that rate for the life of the card. If you can, it’s always best to pay your credit card bills in full every month – this way, the interest rate becomes a moot point and you only pay for what you charged on your card, nothing extra.
Watch out! Interest rates on credit cards can cause severe debt problems if you don’t manage your bills and pay them on time. Some credit cards will charge you interest on your entire monthly balance, even if some or most of it was paid off. Make sure to pay your credit card bills on time every month if you are able to avoid going into credit card debt.
Introductory Rates
While we’re on the subject of interest rates – one thing to look for is the introductory rate of a credit card offer. A large percentage of credit card issuers will offer incentives to apply for their cards – which is great news for consumers. You’ll usually see introductory offers of between 6 and 12 months of either low or even 0% interest rates. This means that for the first 6-12 months of the life of your card, if you don’t pay off your credit card bill every month, you will not get charged interest for any outstanding balances.
Who would this be particularly beneficial to? If you are making a large purchase, having a credit card that offers 0% interest for 6-12 months would allow you to manage payments on that item without paying extra.
Balance Transfers
Credit cards allow you to transfer balances from other cards or accounts onto your new card. This can be especially beneficial to consumers if you have an existing credit card with a large balance and are paying high interest rates on it. By choosing a new credit card with an introductory offer of 0% interest, you can buy yourself time to pay off that balance without paying interest on it anymore. When you’re comparing credit card offers, though, make sure you read the fine print regarding balance transfers. Look for any rates, minimum or maximum amounts and also time frames that might apply to using this technique to lower your payments.
Default Interest Rates
On your credit card application, you might notice a different (usually higher) rate of interest called the default rate. This is the rate of interest charged when you default on your loan – meaning you do not pay back the balance on your credit card. Credit cards are essentially loans that you take out each time you use your card. You are borrowing money from your credit card issuer to purchase goods and services. If you do not pay them back this money, you’ve defaulted, and will be charged higher interest rates until you do.
Cash Advances
Some credit cards will allow you to take cash out of your credit account for spending instead of using the card as your purchasing medium. There are usually limits to how much cash you can take out and you should watch out for the rates that credit cards charge to take this cash out (through a bank, ATM, or by check). When you can, it’s best to just use your credit card to make purchases.
Other Fees
You’ll want to make sure to read the fine print in any credit card that you apply for, but we’ll clue you in on some of the typical fees that you’ll likely be confronted with in choosing a credit card.
Application Fee – some credit cards charge you a one time fee for applying and receiving their credit card.
Late Fees – there is usually a fee that the credit card company will charge you if you are late in your payments. This can be in addition to the interest rate that you are charged on outstanding balances.
Annual Fees – some credit cards, often times rewards credit cards – have an annual fee that is automatically collected (I.e. charged to your credit card) every year.
When you’re applying for a credit card, make sure that the fees associated with the card are either low or manageable within your own personal financial budget.
Grace Period
The grace period offered by a credit card issuer is the time that they allow you to pay back your balance. You’ll typically find grace periods of 20-25 days. This means that once your monthly billing cycle has ended, you have 20-25 days to pay your credit card bill. Due dates are always noted on your statements.
Credit Limits
When you apply for a credit card, you’ll be given a credit limit. This is a ceiling, or a maximum amount of money that your credit card issuer will allow you to spend using that credit card. Your credit limit is usually based on your personal credit history, so it’s always a good idea to check out your credit before you apply to make sure you don’t have any mistakes on your credit report. After having a credit card for a longer period of time, your credit limit may be adjusted (either automatically or by request) depending on your history of paying that credit card off.
Conclusion
The terms discussed here are the main things that consumers will want to watch for when selecting a credit card. Credit card debt has soared over the course of time and consumers find themselves owing much more money than they had intended – but that can be avoided by simply reading the fine print with each credit card application. More importantly, if you pay your credit card bill every month in full, you shouldn’t have to worry about credit card debt at all.
There are literally hundreds - possibly thousands - of credit card offers available to consumers these days. And these days there are more things to compare than just interest rates and fees. Now, credit card holders can be rewarded for their using credit cards. Or, if you’re a business owner, you might find extra features and perks with a business credit card. In this article we’ll go over the basics of some of these above-and-beyond features of credit cards. Whenever you’re thinking of applying for a credit card, it’s always best to compare all of their features so you get the best credit card that matches your financial lifestyle.
Rewards Programs
Probably one of the most attractive features of credit cards these days is the rewards programs that they sometimes offer. Credit card companies will often reward their cardholders for making purchases with the cards. Rewards can range from airline tickets to cash back to hotel discounts, depending on which credit card you apply for. The rewards are usually based on a point system – with each dollar you spend using your credit card, you are rewarded a certain number of points that are collected in your account. When you have a certain number of points, you are able to redeem them for the reward that your credit card offers.
How can you use these types of cards to your best advantage? Think about what you do the most – do you travel? Do you drive a lot and use a lot of gasoline? Do you shop at a particular store a lot? Consumers usually choose rewards credit cards that match their spending habits the best. If you travel a lot, it would be best to get a credit card that offers airline rewards. If you’re on the road a lot, try finding an offer that gives you a discount on gasoline, or cash back for gasoline purchases. One thing to remember when selecting a rewards program – make sure that once you choose it, it fits your needs exactly. For instance, if you fly frequently but usually fly on Midwest Express, make sure your credit card offers rewards for Midwest Express and not American Airlines. If you’re a big driver, make sure you’re getting rewarded for using the gasoline that’s most available to you – BP, Amoco, etc. There are some rewards cards that allow you a choice, but it’s always important to make sure you’re going to get what you expect!
Business Features
If you are a business owner, using a business credit card can help you with things like payroll, managing expenses, and managing employee spending. Business credit cards now offer features like:
•Detailed expense reporting – allowing you to see very clearly where your hard earned business dollars are being spent. •Online account management – allowing you to view and manage your credit accounts via the internet for added convenience •Customized cards and employee cards – allowing you as the business owner to receive cards for your employees •Increased credit limits- allowing you to make the business purchases you need to keep your business running. •Rewards – either travel, cash back, or other discounts, rewards allow you to enjoy a little bit of what you’re spending
Make sure when you’re applying for a business credit card that you compare these types of features and make sure your business card will meet the needs of you, your business, and your employees.
Online Access
It’s not news anymore – online access to bank accounts and credit accounts is just about standard these days. If you’re a high powered geek, though, you might want to check out the interface and features of the online access that your credit card allows you. Online access offers you 24x7 access to your statements, transactions, customer support and billing – making it much easier for you to monitor your credit expenses and pay your bills.
Security & Protection
Another feature of credit cards that is just about standard these days is the protection that credit card issuers offer you for things like identity theft and fraudulent use of your credit card. Unfortunately, there are still people out there who can acquire your credit card numbers – usually by finding a receipt with your credit card number on it, getting the number through hacking online, etc. Consumers should always keep credit card receipts in a safe place, shred them, or at the very least make sure that the credit card number and expiration date is not shown on the receipt before you throw it out. The good news is that if you notice a fraudulent charge on your credit card, it’s usually as easy as calling up your credit card company and reporting it. 9 times out of 10, it’s easy enough to prove that you didn’t make the charge, and your credit card company will remove that charge from your account. With some of the higher end cards – platinum cards, etc. – the credit card companies actively monitor your account and will personally call you if they notice unusual activity on your credit card. In some cases, they do not authorize payments until they get approval from the card holder. These types of features add safety and security for consumers.