Credit cards offer consumers a great way to establish credit and finance purchases over a short period of time. Because they allow for instant financing with flexibility on payments, they’re by farthe easiest credit product to use. Dozens of banks, credit unions, airlines and retailers offer many types of credit cards, each with different perks and terms. There are a few things to consider before applying for a credit card account, however.
Annual Percentage Rate
APR is the rate at which interest is applied to the balance of any charges that are not paid off by the close of the billing cycle each month.
On fixed rate APR’s, the credit provider bases the amount of interest charged on an average of the daily balance, multiplied by the interest percentage, divided by the number of days in a year.
Variable rate APR’s fluctuate, however, since they are tied to the prime lending rates set by the Federal Reserve,
The APR may be different for specific types of balances as well. This includes balance transfers and cash advances taken on a credit card. Many credit card providers also increase the interest rate dramatically if a payment is made late.
Some credit cards also offer low introductory interest rates to open a new account or to transfer balances from other cards. After the introductory period is over however, introductory rates often revert to a much higher interest rate, raising the minimum payment dramatically.
Credit Limit refers to the monetary spending limit the credit provider places on the new account. It is generally the lowest for student credit cards and those who have not established a solid credit history yet. Many credit card providers are willing to raise the credit limit upon request once the user has demonstrated the ability to make monthly payments in a timely manner.
Fees are part of most credit card offers and can add up quickly for the user. There are many different types of fees associated with credit cards and their use. These may include fees for late payment, charging over the credit limit, making a payment by telephone, or triggering overdraft protection. Some credit cards charge annual fees for membership as well.
Rewards are offered to card users by many credit card companies in the form of points, or cash back. There are many rewards programs currently available that are tied to a variety of cards.
Some credit card providers offer points on specific categories of purchases, such as gas, groceries or travel while others reward card users the same amount of points or cash back regardless of what they purchase. It’s important to find out if reward points can be converted to cash or if they can be used for online purchases.
Many credit card rewards expire by a given date while others roll over and accumulate. Some card providers even allow users to apply their points to monthly payments or toward the entire balance on the card. Lastly, bonus points are offered throughout the year on certain credit accounts. These are in addition to the standard rewards already given to card users.
While credit cards allow us immediate access to money, goods and services, they need to be managed wisely. Many of the financial difficulties we encounter with cards can be avoided with good information and planning before we apply for credit. BestCredit.net lets you compare interest rates and a whole host of deals from the different credit card types to help you find the right card for you.