When choosing a credit card, what features do you look for first? Sometimes, the rewards that may come with a credit card can look very appealing. Other times, a low - even 0% - introductory interest rate my look very appealing. But what features do you need the most?
Sometimes the perks of a specific credit card offer don't exactly match the needs of the credit card seeker. In the end, don't let yourself be swayed into signing up for a credit card that may end up costing you a lot of money in the long run.
Tedious though it may appear, your first and most important task - even before you complete the application form - is to carefully read through all of the terms and conditions and highlight anything that indicates a possible charge, cost, or fee.
To assist you in making an informed and rational decision, and in comparing the benefits and costs of various credit cards, it's worth your time to make a "pros and cons" sheet for each credit card that you are considering. Put the name of the card and the company offering it at the top of the sheet, then divide the page into two columns.
In the first column, the "Credit Card Pros," list the benefits: Details of the reward program (if applicable), introductory interest rates (if applicable), regular interest rates, and other components that are important to you. Now comes the harder part. The second column will contain all the "Credit Card Cons," orthe factors that detract from the worth of the card to you.
Grace period
The first thing you need to search out in the fine print is the grace period. This is the amount of time you may be given beyond the due date each month; during this time you can send in your payment without incurring extra fees. Of course, if you pay your bill in full as soon as you receive it, the grace period won't affect you. Nevertheless, you need to be aware of it.
Minimum payment
After the grace period, find out what the minimum payment will be each month. This is usually calculated as a percentage of the whole bill, principal and interest combined.
Late fees
Next, look for any late fees, and list its amount and terms. Be sure that you are familiar with the credit company's exact policy on late fees. Also, be aware that if you fall into the habit of paying your bill late, the credit card company or bank issuing the card has the right to increase your interest rate. Late payments can hurt you faster than you would believe. Almost all credit cards specify a late fee, so the best way to avoid a late fee is to send in your payment right away.
Interest rates
The fourth important thing you should make note of are the interest rates associated with the card. Different balances are often subject to different interest rates, so read carefully. Also, know that interest accumulates from month to month, so that you can end up paying interest on the interest if you only pay the minimum required each month.
Credit cards are a wonderful way to avoid having to carry cash. However, if you want to avoid being charged much more than just the price of the goods and services you purchase with your credit card, it is critical to understand the fees and charges that you may encounter with credit card use.
Carefully reading the terms and conditions of a credit card offer before applying for the card can save you both time and money in the long run. Taking a few minutes to answer some basic questions about the card can help you to avoid any "fine print" surprises that may have appeared down the road.
