3 Things to Expect In Your New Credit Card
Use your credit card the right way and it will be one a most valuable financial instrument. Real benefits first start with the right card, one that gives great rewards with reasonable fees.
The multitude of credit cards available makes it almost difficult to choose one, but it doesn’t need to be if you know the three main things to look for.
1. Rewards That Match Your Lifestyle
Reward credit cards must provide two things; bonuses and the chance to earn money. The card that you eventually choose should also suit your lifestyle.
Don’t make the mistake of accumulating rewards that you just cannot use. Travel reward cards, for instance, are great for travelers. They come packed with bonus points that you can use for airline ticket purchases or hotel stays.
Gas reward cards are meaningless if you don’t drive, and in the same light you shouldn’t get a grocery rewards card if you don’t make it a habit to shop there.
Consider carefully what would mean most to you, even before you start looking for a card. Do you need a low interest rate in order to transfer a balance and pay down debt? Or do you want to earn a standard cash back reward for all your purchases? The card that you choose should reflect your most pressing priorities.
Specific reward credit cards like gas credit cards, business credit cards and airline miles credit cards are beneficial if you’ll make use of them. If you would rather not limit your rewards then cash back credit cards will help you to meet your general goals.
2. Reasonable Interest Rate and Fees
The next step after outlining your priorities is to consider the interest rates and fees. This is very important since the fees that are too high could easily offset any rewards you receive.
Your credit rating will determine the interest rate you’re charged. People with excellent credit scores get the lower rates. These rates vary from 10.20% to 13.99%. If your credit score is not so great you might get a rate somewhere between 15.99% and 19.99%. Applicants with really poor credit pay more than 23% if they’re approved.
The interest rate won’t be an issue if you plan to pay off your balance every month. Still it is wise to look for a good rate just in the event that you need to carry a balance.
Fees vary according to the credit card provider. There are some standard fees that you cannot avoid. Compare these fees to determine the one that meets your budget and expectations.
Annual fee: Most reward credit cards don’t charge an annual fee, at least for the first couple years. In some cases an annual fee might be worthwhile, if you’re given rewards and perks that surpass the fee. Annual fees for reward cards are usually between $50 and $175. Some premium cards charge annual fees that are as much as $500.
Balance transfer: The balance transfer fee won’t matter if you don’t intend to transfer a balance. If you do then the rate should not exceed 5% of the amount that you plan to transfer.
Cash advance: Take out a cash advance and you’ll have to pay at least 2% on the amount you withdrew with most cards. Cash advance fees can go as high as 5% for some cards and there is usually a minimum fee in place.
Late fees: Late payments will incur a charge of $35 to your account. The same goes for over the limit fees.
These are just a few of fee that you can expect, there might be more. Take note that a lot of these fees can be avoided with some careful planning.
3. Easy To Understand Terms and Conditions
It is important to go over the terms and conditions a few times before you apply for your card of choice. Some key areas where you should have 100% clarity include:
Rates for balance transfers: Make sure that you completely understand when the introductory APR on balance transfers ends. You should also be acquainted with any other fees for the balance transfers.
Restrictions on rewards:Credit card providers often place a cap on rewards or set expiration dates. For instance, travel reward cards might have blackout dates. They might also dictate where you can earn rewards and set minimum spending requirements. You need to know what the restrictions are before you make a decision.
Use these three main points to select a few cards. Compare the rates, rewards and terms, and you’ll find the card that will benefit you most.
Crystal is a freelance blogger who loves to write about business and finance topics. She occasionally refers to http://thecci.org/top-credit-card-dos-and-donts/ to get useful information on credit card and spending.