How To Choose The Right Credit Card For You

Unless you have been living on a mountain or another hard-to-reach place, it is likely that you have been exposed to credit card offers. Whether it be by post, email or phone, so called ‘respectable’ credit card issuers have probably targeted you with their tempting marketing ploys. Do not be fooled, there is a lot to consider when you are choosing the right credit card for you.

What Is a Credit Card?

A credit card allows the user to purchase goods and services based on the promise that they will pay for them later. The credit card issuer will set the user a ‘credit limit’, which is a form of cash advance, and any of this credit that is spent must be paid back later with interest charged to it (the percentage increase in value of the borrowed amount). The user can hold off their payments for longer than a month if they wish, but there are penalties for doing so.

Understanding The Credit Card Market

You should know that there are certain things the government regulates. These include interest rates and a number of other financial incentives (such as consumer protection). Almost all credit card issuers will try to disguise their downfalls by offering welcoming bonuses and benefits. You must make sure you take these offers as what they are; bonuses. Read the small-print before you read the large-print.

Weighing The Pros and Cons

Most people base their decision on the interest rates the issuer offers. While you should seek to minimise the amount you have to pay back, it may not always be best to pick the lowest annual percentage rate (APR). Find out what rates are charged on different transactions (such as purchases and transfers) and whether they are fixed (a steady option) or variable (fluctuating but with potential to be cheaper than fixed).

If you can pay your credit card bills on time each month, you will be able to borrow money interest-free. The time in which you are allowed to enjoy interest-free credit is called the ‘grace period’. Although this looks good, remember that a company might charge higher interest rates so it can afford to offer an attractive grace period.

Be sure to scrutinise the other charges involved. Some credit card issuers will make you pay more if you are late paying your bills; others will charge you large amounts of money for withdrawing cash. Another important one is ‘over-limit fees’, the amount you are charged if you go over your credit limit.

Remember to weight up each credit card before you compare them together, this way you will know exactly what type of package you are going to use.