Choosing Credit Cards - The Basics
There really are an amazing variety of credit cards available to today’s consumers; the number of options is simply staggering. Virtually every company around these days has some form of affiliated credit card option available to its customers. While most of these cards are affiliated to one of the major credit card brands, such as Visa, Mastercard, or American Express, they still represent a major source of options from which to choose from. That is why it is important the go back to basics, and remember what are the fundamental reasons you opt for a credit card in the first place.
Below are some of the reasons we look for credit cards and some of the features we should be able to find in them, if they really are as good an offer as they claim to be.
-Is the credit card offered by a company you know and trust?
-What is the annual percentage rate (APR) for the card?
-Is this a temporary, introductory or permanent rate?
-What is the credit limit they have offered you?
-How often are you billed?
-How are repayments calculated and is the outstanding balance free of interest if you pay off the full amount each month?
-Are there other charges or fees associated with the card?
These are all important questions you should be asking yourself before sending that application form back to the company. However, while these may seem like straightforward questions with simple answers, they may not be as clear cut as they seem.
For example, your bank will usually be a company that you are familiar with and know you can trust. However, this does not automatically mean you should accept a credit card from them. This is not because the terms will be unfavourable compared to other lenders but rather because you should be thinking of the consequences if you prove unable to repay your credit card bills. While it is no doubt a serious matter to fall behind in credit card payments, for most people, this will be even more serious if this is also their bank that controls their mortgage and other finances.
Also, while the APR will be calculated in a standard way for all lenders, this is not the only aspect of the price of the card that you should be looking at. While the APR may seem attractive, it will be less so if the company levy hefty charges for late payment or reserve to right to alter your interest rate in the future.
Also, if your choice of credit card is based on the rewards that are being offered by that particular card, you should take into consideration any of the small print associated with the awarding of these rewards. For example, did you know that if you go above your credit limit with certain credit cards you forfeit all rewards that would have been awarded on your spending in that month? Also, the same may apply if you fail to make at least the minimum payment in any given month, the credit card company may withdraw your rewards for this too.
In short, while getting your hands on a credit card may be easier today than it has been in the past, and there are a host of companies out there willing to lend to you, you should remember that credit card agreements are complex contracts and you should think about all the aspects of it before you get involved.
Joseph Kenny is the webmaster of the UK credit card comparison site http://www.creditcards121.com/, Free Help and Advice credit card articles. He also writes for the comparison site http://www.cardguide.co.uk which offers some best credit cards in the UK.
Tags: apr, balance transfers, credit, credit cards, debt, fi, interest, mastercard, minimum payments, visa