Credit Cards- So many choices
Every week you may get a credit card offer in the mail or in an email, but which credit card is right for you? How do you determine which card will work for your lifestyle and are there even considerations to take before choosing? The answer to these questions is undoubtedly yes and described in more detail below.
First off when you're selecting a credit card you do not want to simply compare interest rates and call it a day. There are many more considerations to take before making a snap judgment. The goal is choosing a card that works well for your budget and repayment ability. Start by asking yourself a few key questions:
For what reason do I need a credit card? If you are wanting a credit card for unwise reasons such as taking cash advances, think again. Many credit consumers do not know that cash advances work in very different ways than regular purchases do. For example, if you carry a balance on a card of $500 then take a cash advance out on your card for $1000, the $1000 amount will collect interest in the high teens or twenties. But what most consumers don't know is that that interest will continue to accrue until the day you pay off your complete balance of $500. Only then will the $1000 cash advance amount be paid down with your payments. Also note that you will be paying interest on top of interest until you pay off the balance of the card. So be wise and make informed decisions.
Do I currently owe money and how much? If the answer is yes, ask yourself if it makes sense to take out even more debt or should you try and pay down your current debt. You may be better off creating a savings account for emergencies and restricting your budget.
Is it possible that I have too many credit cards currently? This can be a great question to ask because it could possibly effect your credit score. The number of credit lines, the balance owed, and the limits on each credit line can effect your credit score. Credit agencies consider your current borrowing power to determine credit worthiness. If you are near or at your credit limits, it could reflect poorly in your credit score.
If you're still considering a card, ask yourself:
Do I plan to pay off the balance on this new card each month or carry a balance? Be an informed credit consumer. Different cards for different intended uses will save you money. For example, if you intend to pay the entire balance at the end of each month, a credit card with no yearly fee might be more cost efficient. But, if you intend to carry a balance on the card, be sure to compare APRs of the cards of your choice.
Not All Balance Transfers Are Created Equal
Be sure to read the disclosures of each offer before making a commitment. It is good practice to be aware of any balance transfer fees, APRs, and other terms and conditions. Make note of any tiered rate for balance transfers and purchases. Typically, you will pay a higher interest rate on purchases and a lower rate on a balance transfer; However, the higher rate purchases will not be paid off with your monthly payments until the complete balance of the balance transfer is completely paid for.
One last note
Most consumers find it annoying, for lack of better words, to receive offers for credit cards, insurance, and other credit type items. Well you can stop this never ending junk mail madness. Read more about this at Stop the Junk Mail.
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