Choosing A Credit Card
Using a credit card responsibly can not only be a big convenience, it can also be a good way to establish a solid credit rating.
However, before selecting a credit card, examine various offers to determine which best meets your needs.
First, decide how you are going to use your credit card. If you are going to carry a balance from month to month, look for a card that has a lower interest rate, called an annual percentage rate (APR).
If you plan on paying the balance off in full each month, look for a card that has no annual fee. If you want to use your card for cash advances, make sure that the card you choose has a low APR and low fees for cash advances.
Your card's annual percentage rate (APR) is one of the most important things to understand, because some cards can have several APR's, depending on how you use it.
Some cards may have one APR for balances, a different APR for balances transferred from other credit accounts, and a third APR for cash advances. Other cards have an APR that has one rate when you open it, and changes to a higher rate after the introductory rate period expires.
Other things to consider when selecting a credit card are:
- What kind of card is it? Secured cards require a security deposit and are usually offered to people who have limited credit worthiness. Unsecured credit cards do not require a security deposit. Premium cards generally have higher credit limits and sometimes include features like insurance, warranties or emergency services.
- How is the finance charge calculated? The finance charge is what you pay to use credit, and it is figured out based on the APR and your outstanding balance. Companies can determine the finance charge over one billing cycle or two, using an average daily balance, or including or excluding new purchases in the balance. Receiving a grace period for 30 days after purchasing an item on credit can save you a lot of money on a purchase. Some credit companies have a minimum finance charge, no matter what your balance is. Stay away from cards with minimum finance charges.
- What are the fees? Most credit cards charge a variety of fees, depending on how you use it. Some fees include an annual fee, a balance transfer fee, a cash advance fee, a late payment fee, or a fee if you go over your credit limit. Fees are listed in the credit card agreement. These fees can add up.
- What is the credit limit? The limit is the maximum amount you can charge to the card, including cash advances, balance transfers, fees, and purchases. If you lack the discipline to control your spending you may not want to get a card with too high of a limit. A low limit, however, can cost you money in over-the-limit fees. Again, assess your personality, your habits and your needs to determine how high of a limit you should get.
- How does the cash advance feature work? Find out whether you can get advances through ATMs or by checks issued by the company. Also, figure out what the APR is, and whether there are any cash advance limits or fees that apply.
- Are there other incentives? Some credit card companies offer features including frequent flier miles, insurance, rebates or additional warranty coverage for the purchases you make. These promotions can save you a lot of money, but you must be committed to using them, otherwise, you are likely paying an annual fee for no benefit.
Once you've selected a credit card and been approved, use the card wisely.
Sign your card immediately so it can't be use by anyone else.
After you have activated your card, write your credit card number and the credit company's phone number down on a piece of paper and keep it in a safe place. If your card's lost or stolen, you have that information to report to the credit card company immediately.
Keep track of your purchases and compare your receipts to your credit card statement every month.
If there's a problem or discrepancy, call the credit card company immediately and be persistent until it's resolved.
If used responsibly, credit cards can be a good way to help build credit, even after filing bankruptcy. If you take your credit seriously and do some research, you can find a credit card that meets your needs.
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