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How To Choose A Credit Card
Your credit score may just be a little number, but it packs a
big punch. A poor credit score can keep you from getting a
mortgage or a car loan. In addition, your credit score may haunt
you for a long time if it suddenly drops. Of course, if you have
a good credit score it opens a lot of doors for you. This is just
one reason why it is important to think about which credit card
you apply for before you do.
Every time you apply for a credit card, the company has to
check your credit score. This is a bad thing. Numerous inquiries
from credit card companies look bad on your credit report because
it looks as though you are scrambling to open lines of credit,
which can be a sign that you are struggling financially. Of
course, this may not be the case. However, credit scoring
companies all look at it the same way.
You can avoid scarring your credit score with credit card
applications by choosing your card wisely. Choose a card that
matches your lifestyle and works for you instead of against you.
If you plan to pay off your balance each month, you might want a
charge card instead of a credit card. American Express offers a
number of charge cards with flexible spending programs that are
perfect for people who plan to pay off their balance each month.
They also offer some flexibility so that if you have an emergency
you can use the card and pay off large charges over time. In
addition most of their cards offer you reward points for using
the card. On the downside, American Express charges an annual
membership fee for having the card.
If you do not plan to use the card often, but plan to make
large purchases on the card, which you will pay off over time you
should get a revolving credit card, which allows you to carry a
large balance over time. Of course there cards require you to pay
interest on everything you buy. Interest expenses can get very
high.
Other kinds of cards include:
1) A check guarantee card, issued by your bank, that you can
use to ensure that your cheque will be honoured up to a certain
limit.
2) A debit card, issued by your bank, where whatever you spend
is immediately deducted from your bank account
Do you need a credit card?
a) A credit card means you don't need to carry huge amounts of
cash around and risk losing it.
b) A credit card means you can buy items over the
internet.
c) A credit card means you can make purchases abroad without
having to worry about local currency.
d) A credit card gives the opportunity to spread the cost of a
large payment over several months.
e) A credit card is useful in an emergency. For example, an
unexpected repair to your house or car.
What You Need To Consider:
1) APR (Annual Percentage Rate)
This is the rate of interest that you will pay on any outstanding
balance.
2) Special Introductory Rates
You may be offered a low or 0% rate of interest for a limited
time (Up to 6 months) when you sign up for a new card. A higher
rate of interest may be charged for cash withdrawals.
3) Balance Transfer Rate
Card issuers may offer you a lower rate of interest if your swap
your balance from another credit card to theirs.
4) Interest Free period
Remember to check when interest payments will begin. Will you pay
interest from the day of the purchase? Or will you have a number
of days interest free before you begin to pay? There is usually
no interest free period for cash withdrawals.
5) Cashback and Rewards
Some cards over points or rewards for every pound spent on the
credit card. Make sure that these are appropriate for you. For
example, there&'s no use collecting airmiles if you never
fly.
6) Minimum Repayment
Remember to check what the minimum monthly repayment will be. If
you borrow £1000 on your credit card the monthly minimum
repayment will probably be in the region of £25. But if you
only pay this amount each month it will take a long time to pay
off the balance and cost a lot in total when you include the
interest payments.
7) Annual Fees
This is the fee that the issuer will charge you every year for
using their credit card. Not all credit cards have an annual fee,
so remember to consider this when you are choosing which one is
right for you.
8) Late Payments
There will be an extra charge, as well as the interest owed, if
your payment is late. This charge may even be more than the
amount you owe so be very careful to check what the charge is,
and to ensure that all your payments are made on time. A good way
of doing this is to set up a direct debit from your current
account.
9) Exceeding Your Limit
You may also be charged a fee if you exceed your credit
limit.
Choosing the right credit card is a complex decision, but it
can be made easier by using the free online credit card finders
at http://www.creditcardbuzz.com.
Stephen Kelly is a financial advisor and the founder of Credit
Card Buzz (http://www.creditcardbuzz.com).
A free site with credit card reviews, ratings, analysis and
online applications.
MORE RESOURCES:
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