Getting a credit card isn't always as easy as you might think. The applications can be weird, and they are often written in a way that makes contract lawyers confused. So, the best most of us can do is try to figure out just enough about the cards to stay out of trouble and get something we can actually use.
Any credit application will have confusing and hard-to-understand terms and conditions, but if you look closely, you can find the fees and penalties, which you need to know. The APR will also be shown more than once in the agreement, and the numbers will often be different each time. Your APR will change based on how you use your card, which may seem strange. The APR for a cash advance or a balance transfer is usually different from the APR for a purchase. Read through the terms below and get to know them, because you will see them every time you apply for a credit card or pay your credit card bill:
Annual Fees: This fee is pretty clear and says how much you have to pay each year to use the credit card. Some cards don't have annual fees, while others have fees that can be quite high. Be on the lookout for this one.
APR stands for Annual Percentage Rate. This number tells you as a consumer how much you will have to pay to keep a balance on your credit card. The more the APR goes up, the more it costs to use the credit line.
Balance Computation: This number shows how APR is calculated and how much interest is due at the end of a billing period.
Grace Period: The grace period is the amount of time you have between each billing cycle to pay off your balance without being charged interest. Not less than 20 days is what most people say.
Other Interest Rates: The interest rates for cash advances and balance transfers are shown by these numbers with vague names. In general, the APR for purchases is the lowest, the APR for transferring a balance is next, and the APR for cash advances is the highest.
Transaction Fees: If you use your card for something other than making a purchase, this fee is usually added to your account. Balance transfers or cash advances are two possible uses. When you buy something in a foreign currency, you almost always have to pay a transaction fee. Keep this in mind when you shop online. This usually costs 3 percent of the purchase, but it depends on the card.
What are low-interest credit cards?
A lot of people in the credit card business use the phrase "low interest." Every credit card seems to be advertised as having a low interest rate. This may seem strange, but it's because these are the cards that get the most attention. Even more common are credit cards with no interest, but most people know that this is just an introductory offer and that the interest rate will go up later. So the question still stands: what is a credit card with a low interest rate?
The answer is that it depends on who you ask. As of August 28, 2007, you can find credit cards with rates as low as 8.99%, and the business world seems to agree that anything below 12% is "low." If the interest rate is less than 8.99 percent, you should pay close attention to any fees that come with the card. The creditor is going to make money from your account in some way, even if it's not through interest.
When looking for a credit card, the most important thing to think about is how the card will be used. If you plan to carry a balance from month to month, which is not a good idea, you need a card with a low APR. If the balance is paid off in full every month, the APR is no longer the most important thing to think about. Instead, you should think about any annual fees or transaction fees. Obviously, if big purchases are planned, the credit limit is more important than the APR, but the APR could also be a big factor in this case.
More than anything else, the way a person spends money will determine which credit card they should get. If you keep this in mind and understand the key terms above, it should be much easier to choose a credit card.
