Chances are that when you first applied for a credit card, you didn’t actually do any research to figure out if it was the right card for you. Whether you’re seasoned or just entering college, you need to always research every aspect of a credit card and weigh your options. Before you learn about how to use credits in a way that can actually HELP your credit, you first need to understand how to choose the right card for you.
Here is a list of 5 things you should ask when applying for credit cards:
- Does the credit card have an annual fee?
- What is the annual percentage rate (APR)?
- What are the late charges?
- How long is the grace period?
- What rebate programs come with the credit card?
Do you really want to pay an annual fee?
An annual fee is an amount that you pay every 12 months to the credit card company. It’s common that this fee can reach $100 per year. While there may be some justifiable reasons to choose a card that has an annual rate (for example some high profile cards with VIP perks have them), it’s really no reason to pay an annual fee on top of the interest you are already paying. Try to stay away from these if you can.
What’s an APR?
Your Annual Percentage Rate is the interest rate charged on your purchases. It can be either fixed or variable. This is one of the most important elements to pay attention to. We all know that we want the lowest interest rate as possible. This has alot to do with your credit score as I’m sure you already know. The better your score, the lower your interest rate. Make sure to ask if the rate is fixed or variable. Variable APRs change from month to month, whereas fixed APRs stay the same. The credit card company however can change that fixed rate anytime they please down the road to a different fixed rate. The difference is it will stay fixed for a longer period of time and they must notify you if they change it.
It’s important to know exactly when you could incur a late charge. They average around $35. Some credit cards company require you to pay by a certain date AND time. Be sure you know if it has to be paid by 5 pm.
So what’s a Grace period??
To explain first you need to understand what your Statement Date (also called CLOSING date) and Billing Cycle is. Your Billing Cycle is the period of days that are used to tally up your purchases that will be included on the next billing statement. Your Statement Date is the last day of the Billing Cycle. For example, all purchases made June 1st to June 18th are included on the billing statement that is due July 1oth. June 18th is the Statement Date and July 10th is the Payment Due date. Your Grace period is the time between the Statement Date and the Payment Due Date. If you pay the balance in full during this grace period you avoid interest. BUT some cards don’t have a grace period at all. No matter when you pay you pay the interest. So you have to ask! Again, try to stay away from these.
We love rebates (check out Blog post about how Credit Cards can earn you cash)!! With some credit cards, every dollar you spend earns you a special reward like air miles or redeemable points to shop in their customer rewards store. Do your research and pick a card with a program matches your interests so that’s it’s worth it.
Hope this overview gives you a list that empowers you to make a great decision for you next credit card 🙂