Comparing credit card offers can be a difficult task. What is best for one person may not be best for another. That's why it is important to analyze numerous factors, including interest rates, fees, rewards schemes and member benefits to choose a suitable plastic. If there are additional charges, find out what they're for, whether you need them and how much you would have to pay. Our article will tell you about the main credit card features to pay attention to for comparing the cost of borrowing. It will help you narrow down suitable offers and find the plastic that matches you most.
1. Interest rate
APR, or an annual percentage rate, is the strongest indicator of your finance charge. Nobody wants to pay a high APR. However, there are more types of interest rates than just "low" and "high". You can often find a plastic that comes with an introductory interest rate on balance transfers, a variable APR on purchases and a high default interest rate. If you want to apply for the most beneficial offer, it makes sense to find out what these types of an interest rate mean.
- Fixed/Variable APR. A variable rate will change in accordance with the fluctuations of the market index it is tied to. You may decide that you can avoid sudden and potentially significant increases in monthly payments with a fixed interest rate, but you won't. Federal law allows lenders to change any credit card terms, including APR, with just 15 days' notice.
- Introductory/Ongoing APR. An introductory APR is a special promotional rate provided for a limited period of time. This feature helps lenders attract new customers because an introductory rate is extremely low. After the introductory period expires, you will need to pay the ongoing, or "regular" APR.
- APR on purchases/balance transfers/cash advances. A single plastic can provide different APRs on different types of transactions. So if you have a zero APR on balance transfers, it does not mean that this rate will be applied to purchases or cash advances.
- Default APR. If your make late payments or fail to pay at least the minimum due, you can be switched to a default APR which is actually much higher. For example, if your ongoing interest rate is 10% and you go delinquent, the lender may raise your APR up to 29.99%.
2. Grace period. It is the number of days you have to repay your debt in full without incurring interest. For example, the credit company may say that your grace period is "25 days from the statement date." If you pay off your balance in full within this period of time, you can turn your plastic into a zero APR credit card!
3. Fees. Some credit cards come with annual fees, set up fees, late payment fees, balance transfer fees and other charges. Read the fine print to understand the actual costs you will need to pay.
- Annual fee. It is charged by a credit card company each year for use of a credit card. Annual fee may range from ten dollars to several hundred dollars. Some banks, for example Discover, provide credit cards with no annual fee.
- Setup fee. It is charged when you open a new account. Credit cards for people with good or excellent credit almost never charge a setup fee. If you have a bad credit score, you may need to pay from $29 to $100.
- Cash advance fee. It is charged when you use the plastic for a cash advance. It may be a flat rate, for example, $10, or a percentage of the amount you have withdrawn.
- Balance transfer fee. It is charged when you move your debt from another credit card. The standard balance transfer fee is 3%. Many banks cap the balance transfer fee at $50 or $80 in order to encourage people who want to transfer large balances.
- Late payment fee. It is charged if your payment is received after the due date.
4. Incentives and reward programs Credit cards can come with tempting cash back or point rewards programs, online banking, additional warranty coverage, car rental insurance, money-saving discounts, concierge services and more. The better your FICO score is, the more freebies you are offered.
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