Choosing the Next Credit Card
Choosing a Credit Card
Despite the current economic climate and the ongoing credit crunch, there are still plenty of credit cards out there to apply for. Here's some ideas about how to pick your next credit card.
Interest Rates
Certain perks, such as airline miles or cash-back rewards, are nice, but the interest rate you’ll be charged is perhaps the most important feature of any credit card. Even a small difference in the interest rates means a lot more or potentially less you'll have to pay with interest if you have a balance.
Let’s look at an example
Say you have a credit card with a $ 2,000 balance and an interest rate of 14%. If you make only minimum payments, it will take 173 months to pay the balance off and it will cost all of $ 1,833.24 in interest.
Compare that to a card with the same balance and an interest rate of 20%. So in this case, paying only the minimum every month will result in you paying $ 2,723.59 in interest over the 186 months it will take you to eliminate your debt, a difference of $ 890.35 for just a few percentage points.
As you can see, it’s definitely worth it to spend some time shopping around to find the credit card offers with the lowest interest rates possible.
Bonuses and perks
While the bonuses and perks offered by different credit card companies shouldn’t be as big of a concern as the interest rate you’ll be charged, they’re still something that you’ll want to take into account. Given the huge variety of rewards programs today, it shouldn’t be hard to find one that suits your needs. If you’re a big-time traveler, a card that offers travel points towards airline tickets or hotel stays may be a good choice. Or, if you make frequent credit card purchases, look for a card that offers cash back on every item you buy.
Alternatively, if you can’t decide on a single rewards program, look for a card that offers a general rewards program or one that earns you bonuses at a certain number of locations you frequent. For instance, some cards let you pick a certain number of purchase locations, i.e. certain gas stations or grocery stores, and get a bonus for making purchases. Over the life of an account, bonuses and perks add up, so they're aren't something to disregard entirely.
Rates and fees
Besides the interest rate you’ll be charged on the balances you carry, credit cards may institute a number of other fees or charges that will cut into your spending power. Obviously, it’s in your best interest to avoid as many of these as possible. A few things that you should look for in the fine print are annual fees to keep the card open, rate hikes in case of a late payment, and the company's policy on fraud or identity theft. Being an informed consumer from the start will help to prevent any surprises from catching you off-guard later on.
Tags: Bonus, credit card rates, Credit Cards, perk, select credit cards