Factors You Need To Consider When Choosing A Credit Card

Factors You Need To Consider When Choosing A Credit Card

It goes without saying that not all credit cards are created equally. You should only consider the best ones for your personal situation. Here are five factors to think about when you are looking for your first (or next) credit card.

Cost of Having the Card

Credit cards always come with fees, detailed in the fine print. The fee you need to be on the lookout for first is the annual fee for having the card. There is a trade off for cards that charge such a fee. They often provide a stronger rewards program which can offset the annual fee. Some cards will waive the first year’s fee as a courtesy to new members. 

Consider getting a card that does not charge a yearly fee. There are plenty of these from which you can pick. 

Also watch out for foreign transaction fees, in particular if you travel a great deal. Credit card companies often assess a three percent fee for every dollar you spend in another currency. Once again, there are countless credit cards that do not charge such a fee, so think about whether or not this is important in your life. 

APR or Annual Percentage Rate of the Card

This becomes important if you choose to carry a balance and not pay down the entire amount due by the monthly due date. In this case, interest will build on your carried balance. The credit card shows this APR as your interest rate, or what you will pay for the amount you carry. 

Something to look out for is a low introductory APR. 

These provide you with a pre-set period of lower interest rates (sometimes this is 0 percent). Some cards will also give you a balance transfer lower APR for moving a balance over from another card. This is a smart way to lower the total interest you will pay altogether if you are paying down a significant amount of credit card debt. 

The key is that you always make the minimum payment due on time, otherwise the APR will typically reset to the much higher default rate. This is the highest interest rate possible to pay on this card. 

It is recommended that you pay down the whole balance transfer before the expiration of the introductory period so that you do not pay substantially higher interest rates on the remainder of the balance. 

Another thing to watch for is the grace period on your card. This is the days in between when you charge something and when the interest starts to be assessed. You should not settle for a card without a grace period. These typically last 20 to 25 days on most cards. 

Go for as long a grace period as you can when selecting a credit card. 

Rewards Programs

Among the greatest features of a good credit card is its (sometimes incredible) rewards program. For daily purchases you make, you earn points that you can use towards retail purchases, travel and trips, cash back, and other rewards. Obtaining the greatest amount of points requires that you select a credit card that rewards you most generously where you spend the most money, such as grocery stores, gas stations, online retailers, and specialty shops. 

The key is not to overspend what you intend so that your rewards program does not end up costing you dearly.

Credit Limit

You want a card that offers a high enough credit limit to have sufficient flexibility without being tempted to get into a runaway debt situation that you can not manage. College students are best suited with lower limit choices as they learn to responsibly use credit. After college, it helps to have a larger limit sufficient for your bigger monthly expenses. 

A higher limit is also good in keeping your credit utilization ratio down. 

This makes up 30 percent of your credit score, with the algorithms looking for less than 30 percent total utilization on each card and for your monthly average of all cards. 

Customer Service

You should anticipate having to speak with your credit card company customer service department several times per year. This could be as simple as understanding some charges you made or as desperate as dealing with fraud on your card. 

You need to talk with someone who is helpful, understanding, and competent to address your problems fast. If you notice the prospective credit cards have difficult to navigate web pages or keep you on hold on the phone for a long time when you call them, then you should be warned to expect more of the same once you are an existing customer. 

You do not need to settle for poor customer service where your finances are concerned.

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