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Need A New Credit Card?

Need A New Credit Card?

 

                If you do NOT receive credit card offers regularly in the mail, raise your hand!  You are a rare creature!  And what to do with all those credit card offers?  Other than papering a wall or building an envelope fort, you could wade through all the claims for rewards, low interest rates and shiny cards.  If you are so inclined to compare credit cards, below are a few suggestions.

                 

  • What type of card is it? Credit cards tend to fall into four categories: balance transfer cards for those who are dealing with existing credit card debt, rewards cards for those who pay off balances regularly and are seeking specific rewards, introductory card offers that allow people to catch up on increasing balances, and secured cards that are in essence prepaid cards backed by cash deposits.

  • What is the APR? – Annual percentage rate (APR) is the best method of rate comparison, but credit card companies have some leeway as to what can be included in the APR. APR rates do not apply the same to all types of purchases, and are subject to change.
  • What are the rewards? – Check for restrictions or limitations on any rewards programs. For example, are only certain types of purchases credited toward the rewards, are there high thresholds to obtain rewards, or are rewards difficult to redeem? Also, consider whether the rewards programs are worth the interest rate that you pay or any fees you may be incurring as part of your normal card usage.

  • What are the fees? – Low interest rates are often offset with higher fees. Aside from annual fees, there may be charges associated with late payments, cash advances, foreign transactions, over-limit fees, and rejected payment penalties. More subtle potential fees include customer service charges, costs for receiving paper statements, or fees to increase your credit limit. Check all fees associated with any card to see which ones may apply to you.

  • What is the timeline on this offer?   Introductory offers are great, but they must be balanced against the changes after the introductory period expires. If you are planning to cancel the card earlier to avoid the changes, make sure that you are permitted to do so and investigate any associated penalties.
  • What is the credit limit being offered?– To help your credit rating, it is better to have a card with a credit limit far greater than your average balance (anywhere from 10-30% is a good target). Having a balance at any given time that is greater than 50% of your credit limit can significantly affect your credit rating, and maxing out a card gives creditors serious concerns about your long-term ability to pay.
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