Choosing the right credit card is much easier if you know what you’re looking for and understand what the various credit card issuers are offering. Here are four steps you can follow to help you decide which card is best for you.
Step 1: Know your needs and wants
- How much will I spend on the card each month?
- Will I be able to pay my balance in full each month?
- Would I benefit from any reward programs?
- Am I prepared to pay an annual fee?
Step 2: Use Table 1 or Flowchart 1 to help you choose the right type of credit card
There are many types of credit cards, including specialized cards. If you can’t benefit from a specialized card, use these guide to help you choose another type of credit card that meets your needs.
Step 3: Once you’ve selected the type of card, shop around
To compare the features and costs of cards from different issuers, see the comparison tables in the Credit Cards and You series.
Step 4: Before you make your final choice, make sure you understand all the terms and conditions of your credit card
This step will save you a lot of time and money! By understanding the terms and conditions of your credit card, you’ll get more out of it. At the same time, you’ll minimize the drawbacks of using the card. Make sure you know:
- the interest rate charged on purchases, cash advances and balance transfers;
- how the interest is calculated;
- the annual fee and other applicable fees;
- the grace period;
- the minimum monthly payment;
- what happens if you make your payments late;
- other features such as introductory offers;
- the order of transactions and how your payment will be applied; and
- how to make a complaint if you have a problem with your credit card.
Understanding Low Introductory Rates
Credit card issuers frequently offer an attractive introductory interest rate on newly issued cards or on-balance transfers to your existing card. If you tend to carry a balance on a credit card, this kind of offer may save you money.
However, you should realize that these low rates generally apply for a limited time only. As soon as the introductory period ends, the rate increases to the card’s regular rate. To find out what the regular rate is, ask the issuer or refer to the comparison tables.
Before applying for an introductory offer, make sure you understand its terms and conditions. Ask the credit card issuer:
- Young man listening to music and using a laptop computer, what types of transactions the introductory rate apply to;
- when the introductory period ends;
- what the interest rate will be after the introductory period ends;
- whether the introductory rate will end if you make a late payment or go over your card’s credit limit;
- what the order of transactions is and how your payment will be applied; and
- whether any other fees or conditions apply.
Don’t base your credit card decision solely on one factor, such as an attractive introductory rate. Make sure you understand all the features and conditions of a card before you accept it.
A credit card agreement is a legally binding contract. Make sure you understand all its terms and conditions before you use your card. And if something isn’t completely clear to you, ask questions!