Credit cards are almost a necessity
in today’s society. It has become harder and
harder to get through life without plastic. If you
want to make purchases over the Internet, guarantee
a hotel room, or perform a wide variety of other financial
transactions, a credit card is essential. And, the
truth is, credit cards can be a valuable financial
tool, provided you manage them effectively.
All credit cards are definitely not
created equally and the first step to effective credit
card management is shopping around for the right card
in the first place. The factors to take into consideration
are interest rates, annual fees, other fees, grace
periods and aspects like cash back or other rewards
for using the card.
Interest Rates
One of the incentives credit card companies use to
try to get customers to choose their card over all
the others floating around is to offer a special introductory
interest rate. An introductory rate sounds good, but
can be a trap for the unwary. Generally, the customer
opts for the low introductory rate, runs up the charges
on the card, and is not able to pay the card off by
the end of the introductory period. That’s when
the ‘after-introductory’ rate kicks in,
and you find yourself paying from 12-20% on your credit
card debt. When you are interest rate shopping, you
also need to make sure that the interest rate won’t
take a substantial jump if you are late with a payment.
Some companies bump the interest rate if your payment
is even a day late, and the change is permanent. You
don’t ever go back to the lower rate.
Fees
Be sure to read the fine print. Credit card issuers
have gotten fairly ingenious about hiding a variety
of fees that the casual consumer, who doesn’t
bother to read all of the credit card details, may
end up paying and not even be aware. Annual fees are
fairly straightforward. There are cards that charge
annual fees just for the privilege of carrying the
card, and there are others that don’t charge
annual fees at all. An annual fee is not necessarily
bad, depending on the perks that go along with it.
If there are none, don’t bother with cards that
charge an annual fee. On the other hand, if you have
no credit history or a bad credit history, you may
have to get a card with an annual fee, and use it
until you can qualify for a different one. In most
cases the annual fee can be rolled into the monthly
payments and doesn’t have to be paid up front,
although that is not always the case.
Watch out for hidden fees like closure
fees. Some companies actually charge you for closing
your account. The only way to avoid closure fees are
to carefully read all of the credit card’s terms
and conditions before accepting it and make sure that
no such fee is attached.
Late fees can be charged when your
payment is late, sometimes even as little as one day
late. These fees can vary, but again are disclosed
in the credit card terms, so at least you are aware
and can avoid them by keeping your payments current.
If you travel, beware of overseas transaction fees.
Some card issuers have begun to charge a 1-2% fee
off the top for using the credit card overseas.
Grace Periods
If you plan on paying off your balance in full each
month to avoid incurring any interest fees, make sure
your card has a grace period that allows you to do
so. Some cards begin charging interest at the time
of purchase. In that case, even if you pay off your
balance every month, you will still end up paying
interest to the credit card company. Make sure there
is a grace period on your card – that’s
the amount of time you have before you start incurring
interest charges and it’s usually something
like 25-30 days. Be sure to read the card disclosures
carefully so you will know if there is a grace period
during which you pay no interest, or not. If you don’t
pay off the balance of your account each month, grace
periods really don’t make too much difference
because you will be paying interest anyway.
Other Benefits
Some credit cards offer additional benefits for using
their card – things like airline miles or a
percentage of cash back on all your purchases. If
you travel a great deal or routinely use your credit
card for all purchases and then pay them off before
the end of the month, these can be valuable additions.
However, be sure to read all of the fine print and
make sure the perks aren’t costing you more
in fees and interest than they are worth.
If you can’t get by without
a credit card, and very few of us can in this day
and age, at least be aware of all the different types
of offers that exist and choose the one that will
benefit you most in the long run.
Ethan Hunter is the author of many
credit related articles. If you are looking for help
with Payday Loans or any type of credit issue please
visit us at http://www.PaydayLoanChoice.com
Author: Ethan Hunter
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