How do you choose a credit card?

Answer 1

Here are some tips for choosing a credit card company (or evaluating a credit card company that you currently use).

Make a list of features that best fit your needs, and rank them according to how you plan to use the credit card. For example, if you expect to pay your bills in full each month, the annual fee and other charges may be more important than the periodic rate and the APR, if there is a grace period for purchases. However, if you use the cash advance feature, many credit card companies do not permit a grace period for the amounts due -- even if they have a grace period for purchases. So, it may still be wise to consider the APR and balance computation method. Also, if you plan to pay for purchases over time, the APR and the balance computation method are definitely major considerations.

Call the credit card company or companies that seem to match your needs to verify the publicized information. Ask if they have any other plans available.

If you are currently a cardholder and have a good credit rating, ask the credit card company to lower your current rate or to reduce or waive your annual fee. Negotiate.

Review the following information about the plans:

Is the card accepted nationally? Regionally? Only in one state? Only in a specific store?

Is the interest rate fixed? Variable? Tiered? If the rate is variable, what is the index? The margin? The multiple?

What is the APR for purchases? For cash advances? For balance transfers? Is there a penalty rate if you make late payments?

What method for determining the outstanding balance does the credit card company use to calculate the finance charge?

What is the annual fee, if any?

What is the grace period for purchases? (Grace periods usually do not apply to cash advances, which begin accruing interest from the day of the transaction.)

Does the plan offer enhancements that are attractive to you, such as cash rebates, purchase protections, warranties or guarantees, travel accident or automobile rental insurance, discounts on goods and services purchased, and incentives for use, such as frequent flyer miles? Are these features available at no extra cost? Or, you may be interested in "affinity cards" � all-purpose credit cards sponsored by a professional organizations, college alumni associations, or travel company. An affinity credit card company often donates a portion of the annual fees or charges to the sponsoring organization.