How to Compare Credit Cards

If you want to make a credit card comparison to find the best one to suit your needs it is important that you have a clear understanding of the key features and terms.

While credit cards can be a quick and easy source of cheap or free credit if handled correctly, they can also be a very expensive luxury if you do not keep your discipline. Here we set out the key features and warn you of some of the potential pitfalls before you make your credit card application.

Types of credit cards

When you begin to research the credit card market you’ll find that there is a huge choice of products tailored to suit certain people and certain circumstances. You will find cards for students, people with bad credit ratings and free credit cards, to name a few. While these may have some features that appeal, it’s best to take a closer look before making any credit card application.

Annual Percentage Rate (APR)

APR is the rate of interest you pay on any outstanding balance and is a major factor in how much your credit card will cost you. When comparing credit cards you need to look at this first. Typical APR could be anywhere from ten to twenty percent interest per year so choosing a low interest card is essential if you can’t afford to repay bills in full each month. Potentially the savings could add up to hundreds of dollars. Also, when comparing credit cards watch out for deceiving introductory APRs. These low rates will only last a few months, it is the normal rate that you will be paying after that which you have to compare.

Grace period

Almost all credit cards allow a grace period between when your monthly bill is issued and when you have to make a payment to your credit card account. If you have a grace period of 28 days you could get almost two months between making a purchase and the repayment becoming due. What is more, if you pay off your balance in full within the grace period each month you pay no interest at all. The grace period helps you manage cashflow and avoid interest fees so insist on at least the usual 28 days.

Finance charges

If you know you won’t be paying your card bill off in full each month you need to know how interest is calculated. Different cards use different finance charges and some will cost you more than others. They include: Adjusted balance, average daily balance, daily balance, ending balance, double billing and previous balance. The cheapest calculation method is the adjusted balance method but most issuers use the average daily balance method.

Fees and charges

When making a credit card comparison, fees and charges can make the difference between a great deal and a terrible deal. With the right choice of credit card and a bit of know how, you need never pay a cent. However, other cards will hit you with surprise charges such as annual fees and registration fees, and penalize you if you are late with payments or exceed your credit limit. Read the small print and be aware of all fees and charges before you fill out your apply for a credit card.

Rewards

Many credit cards offer rewards for using your credit card, such as cash-back, discounts and free air miles. Rewards and privileges should not be the only factors you use to select a credit card for your needs.

Article by Richard from Click4Credit.com.au