Choosing the Best Credit Cards

Here are some tips to help you choose the best credit cards when applying for one from a bank or credit card company.

1. There are three basic features that need to be disclosed by credit card companies when you apply for a credit card. This is required by law, and includes interest rate, annual fee, and grace period. There are also other features that you might want to consider such as rebates, extended warranties on purchases, and frequent-flyer miles. In addition, look for a card that honored by your chosen merchants.

* Interest rate: The interest rate on a credit card can be a fixed or floating/variable rate. Fixed rate interest rates, as the name suggests, remain fixed through the life of the credit card, but may also change annually. Floating/variable interest rates are typically lower than fixed rates but will fluctuate periodically, so they may cost you more in the long run. Remember, the law requires companies to issue an Annual Percentage Rate (APR) quote so consumers can compare credit cards.

* Annual fee: this is the fee billed to you for the coming year, on the date you opened your credit card account. The first year may be waived depending on certain criteria, such as if you charge a certain amount per year. Some credit card companies do not charge annual fees at all. 

* Grace period: this is the period after the billing date when you have to make the bill payment (without paying finance charge), which can last for 25 to 30 days. Some banks may provide you with a grace period only in months when your previous balance is nil, while some companies, even if you have a balance from last month, may offer to give the stated grace period on all new purchases.

* Rebates and Discounts: when a percentage from the amount on purchases is refunded to your account, this means rebate. Discounts, on the other hand, reduce the price on the bill before you pay it. If you consistently keep money in your account, consider discounts.

2. Though application fees when applying for credit cards are legal, they are rare. Therefore, it’s best to look elsewhere if a particular credit company charges this type of fees. There are also other fees that you need to watch out for, such as over-limit fee, late payment fee (along with finance charges), transaction fee for cash advances,

3. Secured credit cards are important for people with a poor credit history or no credit history. They may require higher fees and service charges in comparison to ordinary cards, but in circumstances such as long history of delinquency on various types of debt, secured credit cards can be less expensive in total cost and security deposit.

4. Consider a prepaid credit card if you are in debt or have bad credit history, because you cannot use any amount above the balance that has been deposited when the credit card account was set up, and does not carry interest charges.