When shopping around to find the right credit card it is most important to choose the one that incorporates features, including benefits and incentives, that best match your current needs. This can save you money on charges and interest fees. The following steps will help you with choosing the right card offers.
Know how you will use it?
The first step in choosing the right credit card is to consider how you will use it.
- If you expect to always pay your monthly bill in full and on time, and have no interest in features such as frequent flyer miles or redeemable cash points your best choice might be a card that carries no annual fee and offers a long grace period.
- When you sometimes carry over a balance from month to month, you may be more interested in a card that carries a low interest (stated as an annual percentage rate, or APR).
- If you expect to use your card to get cash advances, then you need a card with a low APR and which charges lower fees on cash advances. Remember that some cards will charge a higher APR on cash advances than for purchases.
Avoid unwise plans
The following step has a list of 6 unwise charges to your credit card and is presented mainly for entertainment but still offers some very sound advice of what not to plan.
- Pay Tax Bills
- College Tuition
- Plastic Surgery
- A Lavish Wedding
- Luxury Vacations
It is considered to be fairly common sense that if you intend to embark on a gambling spree, you should set yourself a limit, take only that amount of cash with you, leave all of your credit cards at home, and don’t apply for new ones.
It has also been fairly well-publicized that it is not a good idea to pay or plan to pay your tax bills on a credit card as they often incur additional charges on top of the interest charged by the card issuer. A much more sensible idea is to agree to a payment plan with the IRS to settle a large tax bill.
However, for some of the other items on the list, not so long ago nobody would have thought twice about charging them to a credit card. But, more recent advice suggests that it is best to save up for that dream wedding and not begin married life in unmanageable debt. And, unless you can afford to pay off the debt quickly, it is not a great idea plan to charge college tuition fees to your credit card, too. A luxury family vacation may create some wonderful memories, but managing the repayments on your credit card can leave long-lasting financial worries.
Remember, that large amounts of credit card debt now have a much greater potential to quickly cripple your personal finances. Like Ruth Mata, the credit counselor, explains:
No job is secure right now… Do you have enough money in savings so that if you lost your job you could take care of the important things like your house, your living expenses, and make that payment?
Look for a longer grace period and fewer fees
When looking for the right card you need to check the grace period and the level of fees charged.
If you carried over a part of your balance from the preceding month, you may not have a grace period for new purchases. This means you could be charged interest as soon as you make a purchase in addition to interest being charged on the unpaid balance. Check the credit card application for information about the “method of computing the balance for purchases” to see if new purchases have their own grace period or if there is no further grace period once a balance is carried forward.
Most credit cards charge fees such as annual fee, cash advance fee, balance transfer fee, late-payment fee, over-the-credit-limit fee, credit-limit-increase fee, set-up fee, return-item fee, and other fees. Make sure you are aware of these charges and factor them in when choosing your card.
Check cash advance features
Some credit cards allow you to borrow cash in addition to making purchases on credit. The majority treat these cash advances and credit purchases differently. If you plan to use your card for cash advances check the information access to cash, APR, fees, limits on amounts, and how payments you make are credited to your account.
Research incentives and other benefits
Check to see what incentives and other benefits a card carries before deciding if it is right for you.
Many credit card companies offer single or some combination of incentives and benefits, including rebates, frequent flier miles or phone-call minutes, car rental insurance, travel or accident insurance, travel-related discounts, and credit card registration. With this, a single call is all that’s needed to report all your credit cards are missing in the event your purse or wallet is lost or stolen.
Some credit cards offer insurance cover to meet the payments on your credit card balance if you become unemployed, suffer a disability, or die. This cover does come at a price. You can also insure against the $50 dollar liability that applies if your card is lost or stolen.
Consider the right credit type for your needs
There are three basic credit card types and you should pick the one that best fits your present needs.
- Secured – Require a security deposit (Explained). The larger the security deposit, the higher the credit limit that will apply. Secured cards are usually offered to people who have limited credit records, people who have no credit history or those who have had problems with credit in the past.
- Unsecured – Do not require a security deposit and have just a few features. Most regular cards have higher credit limits than secured cards but lower credit limits than premium cards.
- Premium – Gold, Platinum, Titanium, plus, etc. all offer higher credit limits and usually have extra features, such as product warranties, travel insurance, or emergency service facilities.
Don’t forget about the importance of Terms and Conditions
A credit card is a form of borrowing that usually involves charges and has terms and conditions of use attached. These affect the overall cost of credit to you. It always makes sense to compare terms and charges before agreeing to open a credit or charge card account. The following terms will appear on credit and charge card application and it is important you understand what they mean before
Annual Percentage Rate (APR)
The APR is the actual cost of credit expressed as a yearly rate. This has to be disclosed to you in advance of your signing up for an account and must always appear on account statements.
Some credit card plans allow changes to your APR when interest rates or other economic indicators (indexes) – change. These plans are called “variable rate” programs because the rate and changes to it are linked to the index’s performance. Rate changes raise or lower the finance charges on your account. If you’re considering a variable rate card you should be told at the outset the rate may change and how the rate is determined. You should be advised which index is used and the amount of the margin which is added when deciding your new rate. You should also check to see if there are any limitations on the frequency and amounts of rate changes before agreeing to open a particular account.
Grace Period (free period)
A Grace period lets you avoid finance charges if you pay the balance due on your account in full before the due date. Knowing whether a card gives you a free period is especially important if you do plan to pay your account in full every month. If there is no free period the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. If your card does include a free period, the issuer must mail your bill at least 14 days before the due date to ensure you have time to pay in full if you choose to do so.
Most card issuers charge an annual membership or participation fee. These generally vary between $25 to $50 but can be as high as $100 or even more for some Gold or Platinum cards. There are several card offers that have no annual fee attached.
Transaction Fees and Other Charges
There are a number of additional charges that might apply to your card. Some issuers charge a fee for late payment. Use the card to get cash from an ATM, or if you exceed your credit limit. Some will charge a monthly fee regardless of whether or not you use your card.
Balance Computation Method for the Finance Charge
Your card does not have a Grace (free) period, or you intend to use it as a credit tool to pay for purchases over an extended time. It is important to know what method the issuer uses to calculate your finance charges. This can make a significant difference to the amount you are paying for credit. Even if the APR and your purchasing pattern remain fairly constant.
Special Delinquency Rates
Some cards with low rates for on-time payments apply a very high APR. If you are late in payment a certain number of times in any specified period. These rates can be expensive sometimes exceeding 20 percent. Information about delinquency rates should be fully disclosed to you in credit card applications.
Always know yours as cardholder entitlements
Prompt Credit for Payment
A card issuer must credit your account the day payment is received. There are some exceptions to this. If payment is not made according to the creditors’ requirements or if the delay in crediting the account will not result in charges to the account, the credit need not take place on the day of receipt.
It is important to always follow the card issuer’s mailing instructions. Payment sent to the wrong address could delay your account being credited for a number of days. You could have charges applied as a result. Should you misplace the payment envelope sent with your bill, make sure your own replacement envelope has the correct address written on it. This can be found on the billing statement. If you have any doubts call the card issuer immediately.
Refunds of Credit Balances
When you make a return or pay more than the balance outstanding on your account this might place the account in credit. You can leave the credit in your account or write to the card issuer for a refund. The sum in credit must be more than $1. Any refund must be issued within seven business days of your request being received, and if a credit sits n an account for more than six months the card issuer must try to issue with a refund even if you have not requested it.
Errors on Your Bill
There are strict rules that issuers must follow with regard to promptly correcting billing errors. You will get a statement outlining these rules when you open an account and at least once a year thereafter. Many issuers include a summary of your rights regarding billing disputes on their monthly bills.
Should you find a mistake on your bill, you can dispute a particular charge or charges, and withhold the relevant payment amount until the matter has been investigated. You may have been overcharged for an item, been charged for something you did not accept, or for an article that was not delivered as agreed with the supplier. In these circumstances, you must pay any part of the bill that is not in dispute and any finance or other charges that may apply.
If you decide to dispute a charge
You must act promptly. Contact the card issuer straight away by writing to the ‘billing inquiry’ address on your statement. Always give your name, address, account number, and a full description of the error. Your correspondence must reach the card issuer within 60 days of them sending the bill that first contained the error. They must acknowledge cardholder complaints in writing within 30 days of receiving it unless the problem is resolved sooner. The matter should generally be resolved within two billing cycles and at most within 90 days.
If your card is used without your permission, you can be held responsible for up to $50 per card. If a thief uses your card before you report it missing, the most you will owe is $50. However, if you report the loss of your card before it is used you cannot be held responsible for any unauthorized charges.
To minimize your potential liability it is essential you report the card loss as soon as possible. Some issuers have 24-hour toll-free telephone numbers to accept emergency information (View card issuer contacts). Use the number. You should also follow up on the verbal report with a letter to the issuer. Give your account number, the date you realized your card was missing, and the date you reported the loss.
It is a good idea to have a credit report and monitoring service activated so you can be quickly made aware of any attempt at identity theft.
Disputes about Merchandise or Card Issuer Services
You as a cardholder have the right to dispute charges for unsatisfactory goods or services. To do so you must have made the purchase in your home state or within 100 miles of your current billing address. Unless the seller is also the card issuer the charge involved must be more than $50. You should try to resolve the dispute with the issuer but if you cannot do so you may wish to consider filing an action in the small claims court.