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How do you know what credit card to choose when there are so many credit cards available? It can take ages to trawl through all the banks websites or to call them up and get offers explained. The power of the internet now means there are a number of websites that allow you to quickly and easily compare offers side by side. So what do you need to look out for and what do all the terms mean?
Intro APR: This is the introductory interest rate. Check if the rate applies to balance transfers from other cards only or on new purchases as well. You also need to check how long the offer lasts for and any fees on balance transfers that may apply. To prevent people making too many transfers many credit card companies are now charging a percentage based fee for balance transfers.
Standard APR: This is the interest rate that you will pay on standard purchases. If you know that you will pay your bill in full each month then the interest rate may not be an issue but if you don't pay your bills in full each month then you should consider a low interest credit card.
Interest Free Period / Grace Period: This is the number of days you get interest free on new purchases. It is normally shown as 'up to' a number of days, such as 'up to 55 days'. The reason it says 'up to' is because they show the maximum number of days you can get interest free. The number of days will relate to the first day of your billing cycle through to the date your statement is due. Therefore if you purchase something near the end of your billing month you may get far less time interest free. There are a few cards with no interest free periods. Avoid these cards like the plague as you will already be paying interest by the time your monthly bill arrives.
Cash Advance Rate: Credit cards offer the convenience of accessing cash through a cash advance. However, this convenience often comes at a high cost with many card issuers charging extra high interest rates on cash advances. In addition there may be an ATM fee of several dollars and interest is normally payable from the day you withdraw the cash. Unless you have a card designed for low cost cash advances they are best left for emergencies only.
Annual Fee: Many cards now charge no annual fee but if you want more rewards or benefits then an annual card fee may apply. Check how much it will cost before you apply and make sure that the amount you will make back on the card through rewards or low interest payments will exceed the annual cost of the card.
Rewards: Rewards credit cards are becoming increasing popular and rewards come in many different forms such as points for a gift catalogue or frequent flyer points through to cash-back on your monthly bill. If you put much of your spending through a credit card then you can make a good return from rewards but be careful to avoid the debt trap. It is not worth spending extra just to get extra rewards as the rewards are normally worth around one percent of what you spend. Also, if you don't pay your bill each month and are incurring interest charges then consider a low interest credit card with now rewards. You will probably find the money saved in interest will be far more than the value of any rewards you could have earned.
Credit Required: Think about the credit rating of the cards you apply for. Premium cards such as Gold and Platinum for example are aimed at high income earners. If you're on a low income and apply for such a card you will almost certainly get rejected and your credit rating will be damaged further.
Now you know what you are comparing you can make an informed credit card comparison and find the best credit card for your needs.
This article on credit card comparison is by Richard Greenwood, director of click4credit.com.au a website dedicated to helping consumers find the best card offers including Visa credit cards.
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