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Choosing The Right Credit Card

By: Maria R Cecil

Important credit card characteristics

When comparing credit cards look to see how they stack up in terms of:

Annual Fees -- These fees are still charged by some credit card companies although many are now waiving annual fees to attract new customers. Check if the card has an annual fee before applying for it.

APR -- The Annual Rate of Interest (APR) is the interest rate that is charged on a yearly basis. This interest rate is applied when a consumer doesn't pay off their balance in full every month. Rates vary a lot and credit card companies will now often offer promotional rates where they cut the APR to encourage new customers to apply.

Minimum Payments -- Most cards send out monthly statements that list the spending on the card for a month at a time. Consumers can, of course, pay off the whole balance or they have the option of just paying the minimum payment. Depending on the actual spend on the card this will either be a set fee or a percentage of spend (based on the higher).

Balance Transfers -- These deals enable a consumer to transfer the balance owing from one credit card to another and normally come with preferential interest rates. So, for example, a consumer may be offered 0% interest on a balance transfer to a new or existing card for a year. Sometimes these balance transfer deals will also match deals on the interest charged on new spending. So, in this example, the offer may also include 0% interest on new spending for the same period.

Things to watch out for

Make sure that a good promotional deal is also backed up by fair terms and conditions that will be applied when the deal is done. If a 0% balance transfer deal comes with an excessively high APR on new spending, then the consumer won't actually save as much money as they may think. Be aware with balance transfer deals that there is usually a fee to pay to set up the deal. This will normally be charged as a percentage of the balance(s) to be transferred.

Careful financial management

When a consumer applies for a credit card the company will probably run a credit check on them with one of the major credit agencies to see how much of a risk they will be. The credit score that the credit card company puts together will make the difference between having an application accepted and having it turned down. Make sure not to do anything to adversely affect this score. For example, don't apply for too many financial products in a short period as this looks suspicious. Make sure to make other payments when needed and make them on time.

One common trap that many consumers fall into is to forget that the spending they make on credit cards is not free -- this is not actually their money they are spending, they are borrowing from the credit card company. So, if they spend too much and cannot repay it in full every month they will have to pay interest on the outstanding balance.

Conclusion

One of the most popular kinds of credit card at the moment is the charity card. Using this kind of credit card allows a consumer to support their favourite charity without having to directly donate themselves. Here, the card company will usually make a donation when the consumer is accepted for a card, and then will also give a percentage of the spending on that card as a further donation.

Article Source: Main Articles

Maria Cecil is a freelance researcher and writer specialising in consumer, finance and business subjects.

Find detailed and up-to-date information on understanding credit cards at Shop in UK.

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