Credit Card Offers - Choosing the Right One
We are always being bombarded by credit card offers through direct mail, TV and press advertising. So how do you know which card is really best for you when they all claim to be good. They can't all be right can they? The fact is that the right card for you is going to come down to how you use your card. Find out what you need to look out for and compare when applying for your next credit card.
Credit cards have been an important part of modern living. The option of getting a credit card means taking on some debt leading to the importance of doing a credit card comparison. This makes sure that what you get matches your lifestyle.
When you do your comparisons, there are key features you need to examine. Here are some of them.
Introductory interest rate. This is usually found on cards encouraging you to transfer balances from your existing cards. This rate is applicable only to the transferred amount and not to new transactions. This comes in handy especially when you have significant balances at higher interest on one card and you want to pay it off at a lower interest cost. Check also the duration of the introductory period. Depending on your needs, a 2.2% introductory rate for 12 months may be more suitable than a 1.99% rate for 6 months.
Purchase rate. This is the ongoing interest rate that would be applied to your new purchases regardless if it was made during the introductory period. Consider this carefully as you'll have to live with it for as long as you keep the card. If you usually pay off the entire amount in the statement as it falls due, a high ongoing rate will not matter so much. But if you intend to carry some debt, a lower ongoing rate will be important to save on interest expense.
Rewards program. Your comparisons can include the availability of rewards or loyalty programs. There are special cards with reward schemes, and you will notice they tend to have higher interest rate on purchases and/or higher annual fees (these help pay for the reward items). You stand to reap the most benefit from reward credit cards if you pay off all amounts due each month; otherwise, the added interest you pay will offset any value you get from the reward.
Evaluate the offers by estimating not only how fast you earn points but also how much money you will need to spend to earn the reward. One scheme may give 1 point for every $1 spent and require 10,000 points to earn the reward. Another may let you earn 2 points for every dollar but you have to reach 25,000 points. You'll spend only $10,000 on the first one, but $12,500 on the other.
Annual fee. In your research, you'll likely notice that credit cards with more promised benefits, such as rewards and low interest rate, usually come with higher annual fees. Conversely, credit cards with very little frills (and higher interest) do not even charge annual fees. If all you want out of credit cards are the basic conveniences and you pay off everything due for each month, you can opt for the basic card with no annual fees but be sure to arrange for prompt and full payment of all bills to avoid the high interest.
Interest-free period. This refers to the period when your purchase transaction will not be subject to any interest. Many products provide you up to 55 days. But if you closely at some credit card applications, you will see some cards have as many as 62 days while others may have only 44 or 45 days. Credit cards with longer interest-free periods are obviously better for you.
Apart from the key features above, you will also want to compare their various fees, such as over-the-limit fees and late payment fees. With proper accoutn management, these fees will be the least of your concerns.
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ABOUT THE AUTHOR
Article on rewards credit cards by Richard Greenwood, Director of click4credit.com.au - part of the Click4Group of websites which compare financial products including cards and saving accounts in Australia.