Credit cards and credit can seem very daunting and overwhelming with what’s available! Especially if you are not sure what you are looking for – it’s like going into a minefield if you don’t know where to look.
It’s very important to know that not all credit cards are the same. There are even some credit card companies that deal in shady practises, with hope their clients won’t read the small print (offering a credit card contract where the company gets the majority of benefits than the user).
When you are looking for a new credit card; these are the main points that you should use to identify the credit card that’s best for you:
Number 1: Credit Card Interest Rates
Interest rates are the primary key for when comparing credit cards. APR (the annual percentage rate) is the interest which you pay yearly (you multiply the monthly rate by 12).
The APR is very likely to be only introductory rates, and interest can change over the course of time; along with altering the balance you keep on the credit card, and applying different rates than the APR on balance transfers. Also, cash advances can have higher interest rates applied to them.
You moved the balance of your credit card to a different account with a lower interest rate.
Always check the small print of any APR, so you know which credit card is offering the best deal, which is not necessarily the short-term deal, but also the best deal for a certain way of using the card.
APR’s may either be variable or fixed, which means they’re either going to stay constant for a certain period of time, or they can depend on the prime rate. Make sure to understand what the credit card company is charging onto the prime rate, and if the company is able to change the terms of rate for any reason.
Number 2: Credit Card Grace Period and Billing Cycle
It’s important to acknowledge the end of the billing cycle, as this will be when you have to start paying interest on your purchases. A credit card which offers interest free for 55 days doesn’t actually mean you have to pay off your purchases in 55 days. The billing cycle would instead run into the next billing cycle of 55 days. If anything was purchased two days prior to the billing cycle, then you would only have 2 days of interest free to pay off the purchase.
Ideally the longer the grace period then the better it is; as within that time scale you are getting an interest free loan!
Number 3: Credit Card Fees
Most credit cards will include annual fees, but are not necessarily bad if you are paying for all the benefits you are receiving. E.g. Credit cards which offer a lot of air travel miles would charge a higher annual fee, but this would still save you money if you travelled frequently.
- Make sure you not only compare the fees between credit cards, but what you’re also getting for that fee!
- If there’s no fee, then make sure to investigate whether this will create a higher APR at some point.
- Taking cash advances, or transferring the balance to another card can also incur associated fees.
Number 4: Credit Card Expiry Dates and Special Offers
The majority of credit card companies will offer introductory rates for your APR, balance transfer fees and cash advances. Make sure to look when these offers expire, where the company offers the APR percentage, there will be an asterisk or similar sign beside it; pointing out to read the small print.
Some credit cards will waiver the annual fee in the first year, so it’s important you make sure that you are aware of the permanent details of your credit card which will not last.
Number 5: Credit Card Penalties and Minimums
If unsure you will be able to meet payment every month, then double check the penalties, and what the minimum payments are (But if this becomes a reason then it may be worth reconsidering if a credit card would be suitable)
Number 6: Credit Card Rewards and Points
Credit cards which offer points and rewards have gained a lot of popularity, and have become more frequent these days. Although they sometimes come with a fee, these can also work alongside no fee credit cards. If you are confident that you’re getting the best deal on all of your fundamentals (interest rates, grace period and fees), the extras can be also beneficial in terms of points and rewards.
Number 7: Credit Card Specialization
Credit cards can be tailored with benefits for students, business people, travellers etc. If meet a category then be sure to see what’s on offer.