Most people shop around for the best price on clothes, electronics, and airline tickets. But when it comes to finding the best credit card, too often people forget how much they can save by comparison shopping. When it’s time for a new credit card, be sure to look at the costs, terms, and interest rates, which can all make a big difference in how much you pay for the money you charge.
Key factors to consider when shopping for a credit card
Annual percentage rate (APR) — This is the percentage of your balance that you are charged if you do not pay off your balance in full each statement period. This rate may vary for different types of transactions. For example, you may be charged one rate for purchases and a different interest rate for cash advances.
Finance charge — This is the amount you will be charged to use credit. It is calculated based on your outstanding balance and the APR.
Annual fee — This is the fee you are charged once per year for the privilege of having a credit card. Some cards do not charge annual fees.
Grace period — This isthe number of days between the statement date and the payment due date during which you will not incur finance charges.
Incentives — Many cards now offer rebates, awards, and other incentives to encourage you to sign up for and continue using a particular card. Some credit card companies also have reward programs that allow you to earn points for every dollar that you charge. You can redeem those points at online stores or airlines, and you may also be able to exchange them for cash back.
Credit limit — Most credit card companies offer low credit limits to start. The average credit limit is about $2,500 for a person with a good credit history.
Other factors and fees — You will want to know what the policies are on issues like late payments, over-limit fees, and cash advances. Some of these items will result in additional charges on your credit accounts while others may impact your interest rate.
Choose what’s right for you
If you don’t regularly pay off your balance, you will likely want a credit card with a lower APR. If you do pay your balances regularly, you may want a card with no annual fee or one with an appealing reward program. Evaluate all of the factors listed above to determine the best credit card for your needs.
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