Selecting the Credit Card Lender for You
Okay, so it’s unavoidable in this day and age: you’re going to need some plastic. Remember that these companies make their money on interest that you rack up, so always ask: “What’s in it for me?”
Review the offer, look at the agreement, and check your statement. Here’s what to look for when picking –or keeping – a credit card company that really works for you.
Go for low APR – In recent times, annual percentage rates have plummeted, making credit accounts more attractive than ever. You’ll see offers with APRs as low as zero. You don’t need a college education to see that choosing this option makes a lot of sense. Keep in mind, though, that these are always introductory rates that will rise after the introductory offer period. Also note that the low APR may apply only to transferred balances and that the rate for purchases will be considerably higher.
Pick the perks – Do they offer air miles? Coupons or rebates for dining, merchandise, and services? Hotel and travel discounts? Donations to charitable causes? Some of the perks are really worth your while. Others you’ll never use, so are they really perks?
Opt for no annual fee – A lot of companies suspend annual fees, either for the introductory period or forever. If they charge an annual fee, the perks had better be worth it for you.
Investigate the introductory offer period – Who wouldn’t like the low interest numbers offered for opening an account or for transferring balances from an existing account? Take a good look at how long that introductory offer’s good for, though, because it’s usually for a limited time – six months to a year from now. The interest rate will revert to a higher one at the end of the introductory period.
Check the variable rate information – The APRs may vary monthly based on the federal prime interest rate. For example, the cash advance rate might be the Prime Rate plus 15.99% and the default APR (if you fail to meet the payment requirements) might be the Prime Rate plus 20.99%. That’s pretty hefty. Credit card companies differ in their variable rates.
Sign up for online payments – Lots of benefits here: You don’t have to notify the company every time you change your address, and you won’t miss out on statements. You can pick your own payment date. You can authorize the company to draw electronically from your bank account. You can track your spending more easily and check account activity, 24/7. And you detect any errors or transactions – right away – that you didn’t approve. A word to the wise: don’t save passwords to these sites on your computer.
Watch ATM cash advances – If you use your credit card to get an infusion of cash, you’re in for a big surprise. You may have nailed a really low APR but how much interest will they charge for cash advances? That APR never applies to cash advances and can be as high as 21 per cent. Even if you only draw $100 per month, you’re racking up more than $250 of interest each year. How many textbooks can you buy for that much?
Tamp down temptation – If you object to all those “prescreened” offers from credit card companies and don’t want them to flood your mailbox, the mailings you get will usually provide a toll-free number for opting out so you don’t get any more tempting offers. This action may also prevent these companies from sharing your address with others.