Charging ahead with the right credit card
Thousands of banks and other institutions offer countless different types of credit cards. Some differences are literally just cosmetic, while others represent benefits or cost-savings that may surprise you. It's important to remember that all credit cards are not created equal.
Before evaluating a specific choice, ask yourself if a credit card is right for you at this time. If you don't have the means to pay off the items you charge in a reasonable amount of time, it might not be your best option. If you decide a credit card makes sense for you, it’s time to start shopping for the card with the best features.
The most fundamental differences between cards are also the areas the represent the most variation in cost to you: interest rate (APR) and annual fees. All credit card issuers are required by law to provide standard informational disclosures that can be used to compare rates and fees. Keep in mind, however, that these are “baseline” figures. In other words, applicants whose credit is either exceptional or slightly below par will be offered more or less favorable terms as appropriate.
Annual Fee
If you plan to pay your balance in full each month, shop for a card that has a grace period and carries a low or no annual fee. Even if the interest rate is higher, it will not affect you because you won't be carrying a balance.
Interest Rate (APR)
If you think you'll be carrying a balance, look for a card with a low interest rate. The annual fee may be slightly higher, but in the long run it will be cheaper than paying high interest rates on your balance.
Credit Limit
If a high credit limit might create a temptation to spend, ask your credit card issuer to set your limit to a lower, but still realistic, number. This way you'll have to make a conscious decision to go charge beyond that limit after requesting an increase, rather than giving in to a spending binge.
Evaluating a Credit Card Offer
By gathering this core information about each credit card you wish to evaluate, you will find some obvious choices are revealed during comparison.
Before evaluating a specific choice, ask yourself if a credit card is right for you at this time. If you don't have the means to pay off the items you charge in a reasonable amount of time, it might not be your best option. If you decide a credit card makes sense for you, it’s time to start shopping for the card with the best features.
The most fundamental differences between cards are also the areas the represent the most variation in cost to you: interest rate (APR) and annual fees. All credit card issuers are required by law to provide standard informational disclosures that can be used to compare rates and fees. Keep in mind, however, that these are “baseline” figures. In other words, applicants whose credit is either exceptional or slightly below par will be offered more or less favorable terms as appropriate.
Annual Fee
If you plan to pay your balance in full each month, shop for a card that has a grace period and carries a low or no annual fee. Even if the interest rate is higher, it will not affect you because you won't be carrying a balance.
Interest Rate (APR)
If you think you'll be carrying a balance, look for a card with a low interest rate. The annual fee may be slightly higher, but in the long run it will be cheaper than paying high interest rates on your balance.
Credit Limit
If a high credit limit might create a temptation to spend, ask your credit card issuer to set your limit to a lower, but still realistic, number. This way you'll have to make a conscious decision to go charge beyond that limit after requesting an increase, rather than giving in to a spending binge.
Evaluating a Credit Card Offer
By gathering this core information about each credit card you wish to evaluate, you will find some obvious choices are revealed during comparison.
- What is the annual percentage rate?
- Is the interest rate fixed or variable?
- If the rate is variable, under what conditions will it change?
- Is there an interest-free grace period to pay my balance in full? If so, how long?
- If I don't pay my bill in full, how is the interest calculated? Do I lose the grace period in the future?
- Is there an annual fee? If so, how much?
- What fees might I be charged for going over my credit limit or making a late payment?
- What is the interest rate for cash advances? Is there an additional fee? When does interest begin accruing?
- Does the card offer other benefits such as airline or hotel frequent purchase programs, travel insurance, or special discounts/rebates?
- Does the card use enhanced security features (such as a photo on the front)?