Which credit card is right for you?
How to choose a card? The suggestions given here are from Gerri Detweiler's book, "The Ultimate Credit Handbook," that offers straight-forward advice on choosing a card best suited for your lifestyle. Most importantly, read the fine print carefully! You must understand the terms outlined in the disclosure form provided with all credit card applications. The font may be small and the text uninteresting, but it can save you big bucks down the road.
- Annual fees—an annual fee charged to keep your account, regardless whether you use it or not
- Interest rates or APR—the amount of interest charged to your account, based on your unpaid balance
- Balance calculation methods—average daily balance (best method) bills interest on amount once that month; a two-cycle calculation (worst method) means you may pay twice for interest, depending on the timing
- Grace period—only helpful if you pay your balance in full every month
- Penalty fees—fees that may be charged to your account for late payments, over-the-limit charges, cash advances, transactions, or inactivity
Be aware that a credit card company can increase your APR any time and for any reason. The issuer must give you notice of any rate changes. Notice that the fixed rate cards can be adjusted despite the "fixed" status. Companies have been known to increase the APR of a consumer who applied for additional credit, such as a mortgage or auto loan.
When choosing your card, be sure to ask these questions so you understand the terms of your credit agreement:
- What is the APR and is it fixed or variable?
- Is this your best offer available for me?
- Is there an application fee?
- What is my credit limit?
- Is there a penalty for closing the account if I find out after it is issued that the credit limit is not adequate?
- Are there charges for getting the card?
- If it's a 0 percent APR deal, are there penalties for not paying the balance in full before the end of the deal?
- How do you bill? Two-cycle method or average daily balance?
- What are your hidden fees?
- Is there online functionality so I can pay online and view my bill anytime?
- What is the grace period?
- How do I dispute? Do you charge me to dispute? Do you use arbitration?