Choosing the right credit card can be a difficult task, not least because applicants must qualify for acceptance before receiving the opportunity to review terms and conditions in full. Financial service websites offer useful information on selecting the right kind of card alongside other details and tools, such as the mortgage calculator. Provided below are five things to look for when choosing a new credit card.
Right Credit Card
Undoubtedly the primary concern of most applicants, knowing the interest rates of credit cards is clearly very important – but perhaps not as important as understanding what the rates mean in practical terms.
Calculating the APR (annual percentage rate of interest) applied to credit cards is rarely simple because most lenders use complex formula that have been approved by regulators. Applicants should always seek to find practical examples of APR for this very reason.
The amount of interest that must be paid on a credit card balance each month depends on the APR, the minimum payment percentage, the balance of the card and the type of credit owed (purchases, cash advances and balance transfers are usually subject to different rates). Generally speaking, the lower the APR the better; furthermore, many lenders offer 0 per cent deals for a limited period, subject to terms and conditions.
It is worth noting that applicants with relatively poor credit histories are unlikely to be accepted for low APR credit cards. `Bad credit` credit cards, however, can help to rebuild an individual`s credit profile with the aim of applying for more competitive rates in the future.
Very often, a credit card is chosen not for its standard purchase APR but for its balance transfer rate. Many credit cards offer an interest-free period on new balance transfers, especially for new customers, so this can be an attractive option for those with existing credit card debts.
Credit cards that are designed to offer competitive balance transfer rates and conditions do so with the aim of securing debt from other lenders. After introductory periods end, the normal interest rate is applied to the outstanding balance. It is also customary for cards with strong balance transfer rates to offer relatively high rates on purchases and cash advances because lenders know that many customers will close their existing credit cards after transferring a balance.
High rates of interest are usually applied to cash advances, but some credit card providers offer tailored solutions to customers who only want to use their cards in emergencies.
If a cash advance (where money can be drawn from an ATM) is the only reason for choosing a credit card, it is obviously sensible to look for deals on cash advances.
Hidden Fees and Gems
Most credit cards are subject to various hidden terms and conditions. Hidden charges are sometimes found in the form of maintenance fees, admin fees, service charges, late payment penalties and processing fees. Credit card agreements can also include desirable provisions, however, such as travel cover and product liability insurance. All hidden terms should be identified and understood before a credit agreement is signed.
Finally, it is always worth enquiring about whether a credit card can be managed online. Access to credit card accounts on a 24/7 basis is important for ensuring that payments are never missed. Customers should be able to make payments and set up direct debits online if they want to stay on top of credit card debts. Lenders offering inflexible payment arrangements ought to be avoided.