1. Choosing the credit card that is right for you depends on several factors -- fees, rates, and the benefits you'll get for using the card. Only a few credit cards will rank highest on each of these factors, and you should choose the card that ranks highest based on how you use it. You should also consider the reputation and business practices of the bank or organization providing the card.
2. Know the fees. Don't fall for a "teaser" credit card offer. If you are offered a new card with a low introductory rate, such as 6%, read the fine print: When the introductory period ends, your entire balance will probably be subject to a much higher rate. Also, many credit cards are offered with no annual fees while others charge up to $50 or $60 per year. Ideally, you would want to choose a card with no annual fee. There are also fees that companies charge for late payments. Be sure to check the terms of the credit card agreement, especially if you occasionally are late with a monthly payment.
3. Cash advances. If you think you'll be using cash advances from the credit card, check how much this privilege will really cost you. Most card issuers impose both a finance charge and a transaction fee on cash advances. Interest starts from the day of the advance, and the transaction fee is often 2.5% of the amount taken. Even cards that advertise "no finance charges" usually charge transaction fees.
4. Rewards. Using a credit card can bring the rewards of airline mileage, discounts on travel, electronic gifts, discounts on cars and other benefits. A rule of thumb is that the benefits are usually worth about 1% of the charges. If a card with these types of benefits is important to you, make sure the benefits are those you will really use and that the other aspects of the card do not offset the benefits.
5. Check
your credit up front before applying for any cards (or any other type
of credit, for that matter). This gives you an opportunity to discover--and
correct--any mistakes. You can get your
credit report
online.
6. Apply for a card that will fit your desired credit limit. There is no sense applying for a card with a $2000 limit, for example, if you know that you will need more than that amount before too long. By the same token, applying for a card with a high limit you will not need only requires you to be careful not to load up the card.
7. Reading the offer: Make sure that you read the credit card offer very carefully.
8. Check different credit card offers: Check several credit card offers before accepting one. Credit card rates can vary widely. Compare these features between cards:
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Annual Percentage Rate (APR)
The APR is a measure of the cost of credit, expressed as a yearly interest rate. Check out the "periodic rate," too. That’s the rate the issuer applies to your outstanding balance to figure the finance charge for each billing period. For example, if you have an outstanding balance of $2,000, with 18.5% interest and a low minimum monthly payment, it would take over 11 years to pay off the debt and cost you an additional $1,934 just for interest, which almost doubles the total cost of your original purchase. -
Grace Period
This is the time between the date of a purchase and the date interest starts being charged on that purchase. If your card has a standard grace period you have an opportunity to avoid finance charges by paying your current balance in full. Some issuers allow a grace period for new purchases even if you do not pay your balance in full every month. If there is no grace period, the issuer imposes a finance charge from the date you use your card or from the date each transaction is posted to your account. -
Annual Fees
Many credit card issuers charge an annual fee for granting you credit, typically $15 to $55. Some issuers charge no annual fee. -
Transaction Fees and Other Charges
Some issuers charge a fee if you use the card to get a cash advance, if you fail to make a payment on time, or if you exceed your credit limit. Some may charge a flat fee every month whether you use the card or not. -
Customer Service
Many issuers have 24-hour toll-free telephone numbers. -
Other Benefits
Issuers may offer additional benefits, some with a cost, such as: insurance, credit card protection, discounts, rebates, and special merchandise offers.
9. Being pre-approved for a credit card doesn't mean you'll get any special deals or treatment. Pre-approval simply means the card company is aware of your credit history and standing. It doesn't automatically give you special rates or breaks when it comes to the terms and costs of the deal. And the small print will generally give your card company the opportunity to chance the deal you were pre-approved for.
10. Benefits: Your new credit card may come with benefits such as a free lifetime warranty, discounts on travel, or protection if a purchased item is lost. But if you sign up, be sure to read all notices of changes in the terms of your account. Credit card companies may withdraw the special features while raising the interest rate and finance charges.