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Choosing a Credit Card

It is a mistake to assume that interest rates, credit limits, grace periods and other card features are pretty much the same no matter what card you choose. Before you select a Credit Card there are some key points you need to consider:

  • Annual Percentage Rate (APR): The cost of credit as a yearly interest rate
  • Interest free or grace period: This gives you an interest free period between the statement date and the payment due date, which allows you to avoid any interest charges by paying your balance in full before the due date
  • Fees and charges: These include annual card membership fees; cash advance and late payment fees or charges if you go over your credit limit

If there is an offer for a card with no annual fee, consider whether the interest rate is higher than what you are currently paying and for how long will the annual fee be waived. Some cards have no annual fee for the first year only.

If you choose a card based primarily on incentives, you could end up paying more in fees or interest than the value of the freebies.

If you expect to pay your credit card bill in full each month, go for a card with no annual fee and the kinds of rebates or rewards you expect to use the most.

If you do not expect to pay your card balance most months, go for a card with a low interest rate and the right mix of rebates or rewards to justify any fees.

Find out if a cards interest rate increases after six months or so.

Used intelligently, a credit card becomes a powerful financially rather than a liability.