Credit Card Choices - The questions you need to ask about credit cards
Before you go and and choose a credit card you really need to ask a few simple questions. By doing so, you could save yourself a lot of time, energy and most likely money.
1) How are you going to use your credit card?
If you plan to pay the balance off every month then a charge card might be the best option. If you are going to use your card for balance transfers you should look for a card with a low interest rate on balance transfers. And if you plan to carry a balance from one month to the next a credit card with a low interest rate may be ideal for you.
2) What is the annual percentage rate of the card?
The annual percentage rate (APR) is the percentage applied to balances that you carry beyond the grace period. Most credit cards have a different APR for purchases, cash advances and balance transfers. It’s important to make sure you know the APR for each.
3) How long is the credit grace period?
The grace period is the amount of time you have to pay your balance in full before finance charges are added. The period is usually expressed in days from the billing date. If you have a already on the credit card your new purchases may not have a grace period.
4) What are the card fees?
You really should know the amount of ANY fees and the circumstances under which these fees are applied. The types of fess you can expect are: annual fee, Late fee, and over-the-limit fee. You may also be charged fees for paying your account balance over the phone, for requesting additional copies of your statement.
5) How is the credit finance charge calculated?
The credit card company’s methods of calculating finance charges has an huge impact on the amount you get charged. Some companies methods only take in to account the current month’s balance whilst others consider the current and previous months’ balances. There are two common methods of calculating your finance charge:
a) Include the average daily balance
b) Double billing cycle method.
Of the two, average daily balance method is the least expensive.
6) What is the credit limit?
If you’re new to credit, it’s wise to start out with a low credit limit. It’s importanmt to be very wary of no-limit credit cards because they can sometimes look maxed out on your credit report.
7) What are the rewards?
Some credit cards offer bonus rewards for you using your credit card. Take the time to fully understand the reward structure and the amount of purchases you have to make to obtain the rewards.
