Choosing Credit Cards

Credit card is a kind of retail system that lends money to the consumer instead of deducting it from the account of the user unlike debit card. It requires the balance to be full paid in each month or else charges interest. Instead of interest rate credit card involves several other charges that include Annual Percentage Rate (APR), transaction fees, annual fees and several other charges. There are different credit cards issuing companies that provide credit cards with minimum fees. Therefore it becomes essential for every consumer to use the right card keeping in mind all the charges and APR.

As far as choosing a credit card is concerned, there are plenty of options available in the market with different features. One should first point out his requirements with the best suitable features. So everyone should have basics right as far as the features are concerned. Choosing credit card means choosing the right features. Following are some areas that one has to consider before applying for credit card.

Annual Percentage Rate (APR) – There can be different APR for one single card. The interest rate varies in three different cases. Balance transfer requires more interest rate than cash advance and purchasing. It also depends on outstanding balance and late payment. There are also two kinds of interest rates as fixed and variable. In case of variable, its important to know how often the interest rate changes.

Grace Period – Also called ‘free period’ is the number of additional days given within which you have to give full payment without any additional fee or finance charge. So if you are intending to pay the balance in full then grace period does mater. If any credit card company offers grace period then the company will send you the bill at least before two weeks of the due date and that enough time for repayment. A card without a grace period means the card issuers will impose a finance charge from the date of transaction.

Grace period varies from company to company. Grace period only applies for new purchase but there are some companies who may not provide grace period if you have balance for previous month. Also some card issuer don’t provide grace period for balance transfer or cash advance. So it’s good to see the number of free period according to your plan.

Fees – Credit card companies charges various kinds of fees depending on different circumstances. Some of the most common fees that every issuer charges are like annual fees, cash advance fee, balance transfer fee, late payment fee, limit increasing fee, crossing the credit limit fee, check bounce fee etc. So it’s important to know about all the fees.

Finance Charge – There are various methods to calculate finance charge but generally it depends on outstanding balance, average minimum balance, previous balance, timing of your purchase and payments

Cash Advance - Cash advance features vary from company to company. A cash advance credit card charges higher APR and may be some additional fees. Some companies have a fixed amount of cash advance for a particular amount or a particular period of time. So it’s important to understand all features.

Credit Limit – Credit cards are generally used for purchase, cash advance or balance transfers but in all these three cases there is a limit of transaction. If you cross the limit then you have to pay additional fees and interest.

Additional Features - There are some additional benefits that credit card issuer offers which one can look for. Those additional features include rebates on purchase, car insurance, life insurance and emergency service etc. But it is also important to think whether the additional features are useful for you as this can charge more or can increase APR.

However, it is important to choose the right card with right features according to your requirements. Generally there are three types of cards available in the market: Secured, Regular and Premium. Secured Card demands a security deposit that determines your credit limit. Regular cards have some selective features with higher credit limit than secured but Premium Card offers high credit limit with additional features.

All above features are common and definitely have major consideration before choosing a credit card. As each type of card has different features, it is important to choose the card that suits your requirement. If you are sure to pay monthly bills at time then choose a card that has no annual fees with larger grace period. But, if you are willing to make monthly balance then credit card should be with low APR. In case of cash advance facility a credit card with lower APR and lower fees is essential.