Credit Cards are big business and the credit card lenders pull out all the stops in trying to bring you in as their next customer. The bait they use to get you interested include, no interest balance transfers to get you away from your present credit card company, Reward points, airline miles, and low introductory interest rates. With all this temptation to sign up for a credit card it is important to you to select the best credit card offer that suits your particular credit card application.
Here are the basic terms you need to understand to select the best credit card for your needs.
Annual Percentage Rate
The annual rate is probably the most important fact to consider when choosing a credit card. I think the best cards have interest rates in the single digits. Shy away from credit cards with high interest rates. Many store cards are 18% and over. I have had credit card offers that exceed 20% annual interest. Why get involved with these high rate cards when there are so many credit cards available to you at 9% and below? The interest is charged on the outstanding balance. The interest rate is often different for an in store purchase, balance transfer, and cash advance.
Credit Limit
The credit limit is the amount of money that the credit lender will loan you. The limit is different for balance transfers, cash advances, and purchases.
Fees
- When selecting a credit card consider the fees. First off is the annual fee. Annual fees can range from $25 to over $200 a year just to carry the card in your wallet or purse.
- All credit card lenders charge an over limit fee. If you charge more than your approved credit line then expect a fee of $25 or more for exceeding that limit.
- Find out if the card company charges you for closing the account. Why pay $25 or more just to close out your account?
- All lenders charge a late fee and credit card companies are no exception. Expect a flat $25 charge or more but the fee isn’t the worst of it. Past due payments will get your account flagged and possibly cause an increase in interest rate.
Credit limits are based on your credit history, and ability to pay. An introductory limit could be as low as $200 with low risk customers getting credit limits in the thousands of dollars.
Grace Period
A very important point to understand is the grace period. This is the time allowed before interest is charged on the unpaid balance for purchases. Once the unpaid balance is carried over to the next month then interest is accrued. If the balance is paid within the grace period then no interest is paid. The grace period does not apply to the balance on cash advances, and balance transfers.
Secured Credit Cards
For those with no credit history and those with a poor credit history the secured credit card may be the only option. A secured credit card requires a deposit and credit is allowed up to the amount of the deposit. This is not really a credit card at all, but is more like a debit card, or a prepaid card. In contrast, the unsecured credit card requires no prepaid deposit.