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Money Management
Which Credit Card? Let Us Help You Sort Through the Options
Don't let choosing the right card be overwhelming
WITH NOT MANY options available, choosing a credit card can be overwhelming. Do you prefer a credit card or a charge card? Airline miles or cash back rewards? An annual fee or a high APR? Unless you have a Ph.D. in economics, sorting out the details can seem all but impossible. It doesn't mean you should give up on trying to figure it out though. Failing to understand the terms of the agreement you're signing can cost you once interest rates, annual fees and late payment penalties start adding up. Ask yourself these questions before choosing any new card:
1. Do I plan to carry a balance?
Be honest and decide how likely it is you'll pay your card off each month. If you will, then a charge card — which must be paid off in full each billing cycle — might be a good option. If you won’t, then the APR (annual percentage rate) on your card is crucial. Compare offers to find the lowest APR, and remember the rates you're being offered are based on your debt, income, credit score and on-time payment history.
2. What are the fees?
They go by many names — activation charges, annual dues, monthly maintenance costs — but any fees that appear monthly or annually are something to avoid. According to the Federal Trade Commission, they can range from $6 to $150 a year, which is why it's worth researching them before signing up for any new cards.
3. Do I want miles?
Annual fees can be worth the expense when they're attached to a card with rewards. Whether you want to earn airline miles, free hotel stays or cash back rewards, it's worth crunching the numbers to determine whether the rewards you're earning are worth more than the annual fees you're forking over.
4. How steep are the late penalties?
The amount you'll be charged for a late payment will depend on the card. Despite new regulations governing billing cycles and payment due dates, late payment penalties are still at the discretion of the card issuers. So it's important to read the terms and conditions on your card and understand what types of penalties are being applied to your account.
5. Is this a company I’m comfortable with?
From monitoring your credit to insuring against luggage losses, today's credit card companies provide countless protections and assurances for cardholders. Because of that, it's important to visit the company's website and call customer service to make sure you're signing up with a reputable business. For more information on credit card rules and regulations, visit the U.S. Federal Reserve at www.federalreserve.gov.
Stephanie Miles is a freelance writer specializing in financial issues.
1. Do I plan to carry a balance?
Be honest and decide how likely it is you'll pay your card off each month. If you will, then a charge card — which must be paid off in full each billing cycle — might be a good option. If you won’t, then the APR (annual percentage rate) on your card is crucial. Compare offers to find the lowest APR, and remember the rates you're being offered are based on your debt, income, credit score and on-time payment history.
2. What are the fees?
They go by many names — activation charges, annual dues, monthly maintenance costs — but any fees that appear monthly or annually are something to avoid. According to the Federal Trade Commission, they can range from $6 to $150 a year, which is why it's worth researching them before signing up for any new cards.
3. Do I want miles?
Annual fees can be worth the expense when they're attached to a card with rewards. Whether you want to earn airline miles, free hotel stays or cash back rewards, it's worth crunching the numbers to determine whether the rewards you're earning are worth more than the annual fees you're forking over.
4. How steep are the late penalties?
The amount you'll be charged for a late payment will depend on the card. Despite new regulations governing billing cycles and payment due dates, late payment penalties are still at the discretion of the card issuers. So it's important to read the terms and conditions on your card and understand what types of penalties are being applied to your account.
5. Is this a company I’m comfortable with?
From monitoring your credit to insuring against luggage losses, today's credit card companies provide countless protections and assurances for cardholders. Because of that, it's important to visit the company's website and call customer service to make sure you're signing up with a reputable business. For more information on credit card rules and regulations, visit the U.S. Federal Reserve at www.federalreserve.gov.
Stephanie Miles is a freelance writer specializing in financial issues.
This article is from WorkingWorld.com
