Almost on a daily basis, consumers open their mailbox and find solicitations touting, “You are pre-approved or congratulations – you qualify for a 0 interest Visa credit card.”
They urge people to sign up now, to take advantage of their low introductory rate and to not miss out on “this limited time offer”
However, stop for a moment before filling out that form and signing up for a credit card that may or may not get you into a sticky situation later.
You better shop around
As with every thing else, know the facts, then search and compare. Websites like CreditCards.com and CreditorWeb make it easy by allowing consumers to compare side by side different credit card offers.
The next step in choosing your credit card is to stop and think about how you plan to use it and your spending habits. Are you someone that pays your bill in full, monthly, or do you carry a balance, and do you plan to use the card for cash advances?
All these play a part in the type of card to get. If you pay your bill in full each month, then a card with no annual fee and a long grace period might be best for you.
However, if you get cash advances or carry a monthly balance, then the key factors to look for are the card’s cash advance fee and the annual percentage rate.
Know what you’re paying
The annual percentage rate (APR) is the interest rate one pays if they carry a balance, take out a cash advance, or transfer a balance from another card. It must be disclosed before signing any paperwork. A single card can have several APRs. There can be one APR for purchases, another for cash advance, a tiered APR that has different rates for different levels of the balance.
Also, check if a card has a fixed or variable APR. A fix APR doesn’t change or change very little. However, the credit card company must tell you before increasing the fixed APR.
A card with a variable rate means the APR changes from time to time. It’s usually tied to another interest rate.
A credit card company’s method of calculating an outstanding balance can make a big difference in the finance charges you’ll pay. The most common method is by using the average daily balance, which is basically taking the account balance at the end of each day’s business and adding all of these balances and dividing by the number of days.
The method that favors credit card holders is the adjusted balance. Your balance is taken from the previous statement, new charges are added, payments made are subtracted and the figure is multiplied by the monthly interest rate.
An explanation of the method can be found on a billing statement, but if you don’t understand, call the card company.
Watch those fees
Finally look at the fees a credit card company charge under certain circumstances. There are annual fees, cash advance fees and balance transfer fees, to name a few. All of these make a difference in how much you pay. It’s a cliché, but read the fine print in your credit card agreement to see if there are other fees and charges
Just remember: when choosing a card, shop around for the best plan to fit your needs and make sure you understand the terms before accepting.