Like most consumers, you probably receive countless credit card offers. Some tout a 0% APR; others may offer a cash incentive for switching or promote rewards or retailer perks. Many choices make it challenging to cut through the clutter and find your true credit card deal.
Start by reading the fine print — and understanding your options.
Your APR is one of the most significant factors impacting the cost of your card. The lower your rate, the better, and it keeps monthly payments affordable. Also, see if the rate is fixed or variable. A fixed rate will not fluctuate with market conditions and is easier to manage. A variable rate, often tied to Prime Rate, can rise and fall and is more challenging to oversee.
It’s also wise to avoid cards that charge “deferred interest.” After the introductory rate period, you’re responsible for the full amount of interest incurred from the beginning of the promotional period.
Beware of 0% offers.
While they sound promising, 0% credit card offers may not be your best deal. Note that the 0% APR is an interest-free period on balance transfers or purchases – but only for a limited time. If considering an offer, find out the length of the introductory period and what you will pay after the intro period. To keep a preferred APR (or 0% offer), more than likely, you CAN NOT be late on even a single payment. Many promotional cards will lose their promotional rate with just one late payment.
“In the world of temporary 0% rates, credit card companies aren’t rooting for consumers to succeed. Read and understand the offer’s fine print and comb the credit card issuer’s website for additional information on how it handles balance transfers. If understanding these offers doesn’t come easily to a consumer—or if they haven’t overhauled the spending behaviors that got them into debt—they might be more likely to come out ahead by simply paying down existing balances as fast as possible.” ~ Investopedia
Avoid retailer cards.
It’s easy to get enticed at the point of sale for a retailer credit card, especially with the bonus of a discount on your purchase. Tread lightly; these cards typically carry a high APR, and if the balances carry over from month to month, you may pay more than the savings from the initial offer.
Fees add up.
The key to calculating any card’s cost is understanding the fees you must pay. These may include annual, balance transfer, and late payment fees. The more fees you pay, on top of any interest accrued, the greater the cost of your card.
Avoid juggling multiple credit cards.
With multiple cards, staying disciplined with the amount of credit you tap into is difficult. Managing numerous payments and due dates is also challenging, and having too many open cards can adversely affect your credit score.
Don’t max out your card.
Besides being difficult to repay, maxing out your credit card impacts your “utilization ratio” on your credit report, hurting your credit score. This ratio is also affected by opening another lender’s card, making several transfers or purchases on the card, and then proceeding to max out your limit.
Not sure what you’re paying?
Let us help. Understanding your options and comparing your options can lead you to your true credit card deal. Our Mastercard® Credit Card’s 10.90% fixed APR is much less than the megabanks, a better deal than most retailer cards, and available with fewer fees.
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