Shopping for a credit card can be more complicated than you might think. The applications can be strange, and are often worded in a way that can confuse lawyers who specialize in contract law. With that in mind the best most of us can do is try to understand the cards just well enough to stay out of trouble and get a product we can actually use.
The terms and conditions of any credit application will be complicated and arcane, but with a careful eye you can spot the fees and penalties, which is something you need to understand. APR will also be listed in several places through the agreement, often with different numbers shown. This may seem strange, but your APR will differ depending on how you use your card. Purchase APR is usually different from cash advance and balance transfer APR. Read over and familiarize yourself with the terms below, as you will see them every time you apply for a credit card or pay your credit card bill:
- Annual Fees – This fee is fairly clear, and defines how much must be paid each year to use the credit card. Some cards don’t have annual fees, while other can carry a hefty one. Keep an eye out for this one.
- APR – This acronym stands for Annual Percentage Rate, and this number defines how much you as a consumer will have to pay for the ability to carry a balance on your credit card. The higher the APR, the higher the amount charged for using the credit line.
- Balance Computation – This number defines the time frame in which APR is charged, and defines the interest owed at the end of a billing period.
- Grace Period – The grace period is how long you have per billing cycle to pay your balance prior to having interest rates applied. The most common is not less than 20 days.
- Other Interest Rates – These vaguely named numbers will define what the interest rates are for cash advances and balance transfers. Generally speaking purchase APR is the lowest, then balance transfer APR, and the highest is cash advance.
- Transaction Fees – This fee is usually charged to your account if you use your card for something other than a purchase. Uses might include balance transfers or cash advances. There is almost always a transaction fee when making a purchase in foreign currency, so be mindful of this when buying goods on the internet. The charge for this is usually 3% of the purchase, but varies between cards.
Low Interest Credit Cards Defined
The credit card industry throws the term “low interest” around a lot. Every credit card seems to be advertised as low interest, and while this may seem odd it’s due to the fact that these are the cards being advertised the most. Even more common are 0% interest credit cards, but most consumers know these are introductory offers, and the interest rate will increase at a later date. So the question remains, what is a low interest credit card?
The answer is low interest is relative. As of 8-24-06 credit cards as low as 8.99% can be found and the industry seems to agree that anything below 10.9% is considered “low”. If you see anything lower than 8.99% it would be wise to pay close attention to any fees the card might have associated with it, as the creditor is going to make money from your account and if it isn’t through interest it will be somewhere else.
The most important consideration to make when shopping for a credit card is how the card is going to be used. If a balance is going to be carried every month (not recommended) then a low APR card is of paramount importance. If the balance is paid in full each month, the APR is no longer center stage, and annual fees or transaction fees should be considered where applicable. Of course if large purchases are intended then credit limit becomes the more important aspect, though APR might be a serious consideration here as well.
The spending habits of the consumer will define which credit card should be chosen more than any other aspect. With that in mind, as well as an understanding of the key terms above, choosing a credit card should become much easier. For more information on credit cards, visit the directory at http://www.bankcardfinder.com. Here you will find a good cross section of different credit cards, as well as other informative articles that can help you decide which product is right for you.