Credit Cards
There are a wide variety of credit card options available. The specific credit card alternatives that are available to you depend upon your income and your credit history. Here are some factors that you need to consider when selecting a credit card.
Rates
A credit card's rate is the amount of interest that you will pay on any
unpaid balance that you carry on your card. The annual percentage rate, or
APR, is the credit card's interest rate expressed as a yearly rate. There
are many different rate structures, but they fall basically into two
categories:
Fixed
The APR for a fixed rate credit card does not change very often. The
credit card company must notify cardholders before changing the rate.
Variable
The APR for a variable rate credit card changes more frequently. The rate
change for this card is typically based on an external economic factor such
as the prime rate or the Treasury bill rate.
Fees
Fees are important to consider when looking for the best credit card deal.
Annual fees are what you pay for the privilege of using the credit card.
Other fees may be imposed upon the credit card based on a specific
behaviour, such as paying late or going over the credit limit. Not all
types of fees apply to all credit cards. To discover what fees apply to a
specific credit card, read the card application carefully. Some common
types of credit card fees include:
Annual fees
The fee is charged annually by the credit card issuer as long as the
credit card account is open, whether or not there is a balance on the
credit card. For customers with good credit, it is possible to get a credit
card without an annual fee.
Closure Fees
A closure fee is a fee that the credit card company charges you to close
your account.
Late Fees
A late fee is assessed when you make a payment after the due date. Making
a late payment can also cause your interest rate to increase.
Grace Period
A credit card grace period is a period of time after you make a purchase
during which no interest is charged. Grace periods very widely from credit
card to credit card, and not all cards offer a grace period.
Rewards
Credit card reward programs offer the consumer a premium of some type to
encourage usage of the card. Some common reward programs include:
Point-based
A point-based program allows you to accumulate points each time that you
make a purchase. Accumulated points can later be redeemed for
merchandise.
Cash back
A cash back reward program returns a percentage of cash to the consumer,
based on the amount that they spend.
Frequent flyer
Some credit cards offer airline frequent flyer miles. While frequent flyer
miles can be a good deal, the consumer should be aware that airlines may
impose restrictions on their usage.
The Bottom Line
There are many credit card options available. By carefully considering the
alternatives you can select the best credit cards for your needs. It is
important to read your credit application carefully to make sure that you
understand the details of the offer.
