You only have to open the mail, turn on the TV or read the paper to see a whole range of credit card offers. How do you know what you need to be looking for and make a fair comparison to find the best card? Find out what all the terms mean and how to seperate fact from marketing hype.
Intro APR: This is the introductory interest rate. Check if the rate applies to balance transfers from other cards only or on new purchases as well. Before you apply then make sure you know how long any introductory offers last, what fees apply and what rate will be payable once the offer has ended. To prevent people making too many transfers many credit card companies are now charging a percentage based fee for balance transfers.
Standard APR: This is the interest rate that you will pay on standard purchases. If you know that you will pay your bill in full each month then the interest rate may not be an issue but if you don’t pay your bills in full each month then you should consider a low interest credit card.
Interest Free Period / Grace Period: This is the number of days you get interest free on new purchases. This period is normally described in the form of ‘up to’ a number of days, for example,’up to 55 days’. The reason it says ‘up to’ is because they show the maximum number of days you can get interest free. The number of days will relate to the first day of your billing cycle through to the date your statement is due. Therefore if you purchase something near the end of your billing month you may get far less time interest free. There are a few cards with no interest free periods. Avoid these cards like the plague as you will already be paying interest by the time your monthly bill arrives.
Cash Advance Rate: Credit cards offer the convenience of accessing cash through a cash advance. However, this convenience often comes at a high cost with many card issuers charging extra high interest rates on cash advances. In addition there may be an ATM fee of several dollars and interest is normally payable from the day you withdraw the cash. Unless you have a card designed for low cost cash advances they are best left for emergencies only.
Annual Fee: Many cards now charge no annual fee but if you want more rewards or benefits then an annual card fee may apply. Make sure you are aware of any annual fees before you apply and do a rough estimate to work out if the value of rewards or interest saved will outweigh the cost of the annual fee.
Rewards: Rewards credit cards are becoming increasing popular and rewards come in many different forms such as points for a gift catalogue or frequent flyer points through to cash-back on your monthly bill. If you put much of your spending through a credit card then you can make a good return from rewards but be careful to avoid the debt trap. It is not worth spending extra just to get extra rewards as the rewards are normally worth around one percent of what you spend. Also, you will be paying interest every month if you don’t pay your bill in full and on time each month. If this sounds like you then you could benefit the most from a low rate credit card and do without the rewards. You will probably find the money saved in interest will be far more than the value of any rewards you could have earned.
Credit Required: Think about the credit rating of the cards you apply for. Premium cards such as Gold and Platinum for example are aimed at high income earners. If you’re on a low income and apply for such a card you will almost certainly get rejected and your credit rating will be damaged further.
Now you know what you are comparing you can make an informed credit card comparison and find the best credit card for your needs.
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