Competition has pushed the credit card market swamping evey mailbox with offers of all kinds. Their goal: encourage you to avail of these ‘special’ offers. So which one should you choose?
These are some key features to consider in your credit card comparisons. Keep them in mind when going through various credit card offers.
– Interest rate: This is the most important feature to consider. A credit card offers several interest rates, including: an introductory rate, usually of limited duration for a specified number of months; a standard purchase rate that will prevail after the special introductory period; and a cash advance rate, usually the highest.
The credit card offers on introductory rate will look similar, usually varying around 0-2%. The key aspect to consider is the length of the offer. This can range anywhere from 3 months in some cards to 12 months. The cards that offer the lowest possible introductory rate running for the longest period will be the most attractive.
The normal interest rate is crucial to your future costs. You want this to be competitive. The key consideration here is whether it is fixed or variable. Variable rates change periodically, which may not be favorable to you in times of unstable or rising interest rates. Fixed rates will stay with your for a longer period, in some cases for the credit card’s entire life. A downward trending interest rate may be a disadvantage but you could renegotiate this with the card issuer. Generally, the best credit card offers involve a fixed rate.
– Fees and charges: The trickiest decision here involves annual fees. Zero annual fees are being offered by some credit cards but the interest rates could be higher. Other cards impose an annual fee, ranging from lows of $30 to highs of $80 or more, but in exchange offer lower interest or enroll you in generous reward schemes.
Is the annual fee worthwhile? Compare a card that charges an annual fee against similar ones without annual fees, and evaluate the benefits it offers vis-à-vis the others. You may find it worthwhile to pay an annual fee if the credit card offers significantly lower interest (vital to you if you plan to carry a balance) or an exceptional rewards scheme you want to join (advantageous to you if you always pay off the entire balance).
Remember, though, that you maximize the benefits of rewards schemes if you use your credit card frequently. Annual spending of around $20,000 may be necessary; at 1 point per $1, that would give you 20,000 points which can be redeemed for something of value.
Other fees and charges could include over-the-limit fees, late payment charges, etc. Breaching of your credit limit as well as other terms can cause these to happen. You don’t plan on doing that in order to avoid unnecessary costs.
– Benefits and protections: Each credit card offers a package of protection and benefits, but the scope differs widely. Examine them and see which ones might be of advantage to you. Protection against theft, loss or damage, fraudulent use, purchase charge-backs and extended warranties can be very useful. Frequent travel may look favorably on credit card offers of free travel insurance and related cover for lost/delayed luggage, car rentals, and others.
It is always the one that best provides what you need that is the best credit card for you.
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