Control Credit - Debt

Choose the Right Credit Card

Beware of the free t-shirts! Credit card companies want your business. They'll do anything to win your service, including giving away freebies like food, phone cards, and t-shirts. Don't sign up for a credit card just for the free stuff ? only get a card if you need it, and only once you've done a bit of research to ensure you're getting the best deal. If you're considering a card, check out the questions below. You can also print a checklist for comparing credit cards from the Federal Reserve Board.

1. How will you use your credit card?

  • If you expect to always pay your monthly bill in full, your best choice may be a card that has no annual fee and offers a longer grace period.

  • If you think you may occasionally carry over a balance from month to month, the best card may be one with a lower interest rate.

  • Remember -  don't use your credit card like a debit card. If you constantly use it for small purchases, like your morning coffee, your balance will add up quickly!

2. What is the interest rate?
Interest rate or annual percentage rate (APR) is the rate you will pay if you carry over a balance from month to month, take out a cash advance or transfer a balance.

There are several types of APR, and a card can have multiple APRs:

  • APR for purchases

  • APR for cash advances - can often be higher than the APR a purchase.

  • APR for balance transfers- if you transfer a balance from another credit card.

  • Tiered APRs -Different rates are applied to different levels of the balance. For example, a 16% rate is applied from $1-$500, 17% on balances above $500.

  • Penalty APR- Interest will increase if you are late making payments.

  • Introductory APR - A temporary rate is applied to the balance for set period.

  • Delayed APR - No APR is applied until later date. For example, "No interest until June."

  • Fixed vs. variable APR -a fixed APR does not change, while a variable APR changes periodically.

Source: Federal Reserve Board

3. What is the credit limit?
The credit limit is the maximum amount the cardholder is allowed to use for purchases. If you exceed the limit, you may have to pay a fee.

4. What are the associated fees?
Credit cards charge various fees for services, maintenance, or membership. Common fees include:

  • Annual Fee (Dollar amount charged for annual membership.)

  • Cash Advance Fee

  • Balance transfer fee

  • Late payment fee

  • Over-the-credit limit fee

  • Credit limit increase fee

  • Set-up fee

  • Return item fee

5. How widely is the card accepted?
Because of merchant/lender agreements, not all credit cards are accepted everywhere. If you want to use your credit card while traveling internationally, you need to figure out whether it is issued and/or accepted outside of the United States. 

6. What services and features are available?
Many credit card companies offer perks, or incentives, to use the card. Common services and features include:

  • Cash back on purchases

  • Frequent flier miles

  • Insurance for car rental or travel accidents

7. Shop around!
Before deciding on a credit card, compare cards and review fees using www.bankrate.com.