As you grow up and head out to the real world, the more you’ll be responsible for making very important financial decisions. One of the most important is choosing the right credit card.
There are literally thousands of different credit cards, from different companies, with different rates, and different fees. As a result, it’s really smart to look close and compare all the details, and then choose the credit cards that are the best for you financially.
Let’s take a look at the top five things to check out when comparing credit cards.
1. Compare the annual percentage rate (APR) for purchases.
The APR is the interest rate they offer to pay on your balance per year. It usually shows up as a bold number in an offer, but keep in mind, it’s generally NOT guaranteed. Once you apply, the actual rate could be higher, depending on your credit score and history. Plus, if it’s an “introductory rate,” check to see how long that rate lasts.
Also, determine if the APR is fixed or variable. If it’s variable, find out how it’s calculated, and keep in mind variable rates often go higher.
Usually, lower, fixed-rate APR cards are the best choice -but they don’t always offer rewards. So, if you pay off your balance in full each month (and have to pay no interest) a higher interest card with more rewards might actually be better. The important thing is to understand the APR, know how you’ll use the card, and choose the one that fits your style the best.
2. Check for annual fees.
A lot of credit cards bill you for an annual fee in addition to interest charges. So, before you sign up for a credit card, check to see if you have to pay an annual fee. It’s usually better to get a card with no annual fees, but special types of credit cards (from airlines, etc.) offer benefits that may be worth the annual fee.
3. Learn about the grace period.
Another thing to check when considering a credit card is the grace period – the time they allow you to pay your bill in full before any interest is charged. Most cards have a 20-30 day grace period. But some cards don’t have any grace period, and you get charged interest from the day you make a purchase. If you don’t pay your balance in full each month, then there is no grace period at all.
4. Determine if there is a minimum finance charge.
Many credit card agreements include a minimum finance charge. This is really important to understand if you keep a very small balance on your card. For example, if your unpaid balance (after the grace period) is just $10, and the interest charge is just a few cents, but the minimum finance charge is $1.50, then you’ll get charged the $1.50.
5. Read about any additional fees.
Another helpful tactic for getting the best credit card is to read the fine print in the offer, and see what additional fees you may have to pay. Getting charged additional fees can cost you a lot, so it’s best to know what the fees are, and avoid paying them whenever possible. Here are typical additional fees to look at:
- Balance transfer and cash advance fees
- Late-payment fees
- Over-your-credit-limit fees
The more time you spend analyzing and comparing different credit card offers, the better choices you’ll make. These days, credit cards are an important financial tool that almost everyone needs and uses. Getting the best credit cards for your needs can have a very positive impact on your financial future for years to come. It pays to show interest in comparing credit cards!