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What To Look For in a Credit Card The internet makes it so easy for consumers to comparison shop for just about anything, and credit cards are no exception. You’ve probably received multitudes of “pre-approved” credit cards offers in the mail, but before you accept any of them, it pays to compare local credit card offers with those from financial institutions nation-wide. Here’s what you should look for:
- Annual Percentage Rate (APR)—is it variable or fixed and when can/will it change?
- Periodic Rate—interest rate used to calculate the finance charge on the balance each billing period.
- Annual Fee—is there a flat annual fee just for having the account? Find a card without an annual fee.
- Grace Period—This is the number of days you have to pay your bill before finance charges start. Without a grace period, interest can begin at the time of purchase, before you actually receive the bill. Look for a card with a grace period.
- Finance Charges—How is it calculated? Most lenders calculate finance charges using the average daily balance. Look for lenders that use an adjusted balance that subtracts your monthly payment from your beginning balance. This method will generate the lowest finance charges. Avoid offers that use the previous balance when calculating what is owed. In addition, find out if there is a minimum finance charge.
- Other Fees—Find out what the fees are for cash advances, late payments, or over the limit charges. Some lenders actually have monthly fees even if you don’t use the card. These types of fees can be substantial and cut into your monthly payments.
- Cash Back or other Rewards? If you’re going to use a credit card, you might as well have one that gives something back. Some offer 5% back on all gas purchases or 1% cash back on everything. Read the fine print for details such as how much can be accumulated and expiration periods.
The Fair Credit and Charge Card Disclosure Act require credit and charge card issuers to include items 1-5 on credit applications.
For more detail on credit and consumer rights, go to the Federal Trade Commission website at www.ftc.gov or the Federal Reserve Board at www.federalreserve.gov >> Back to Articles
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