When it comes to choosing a credit card these days, the choices are endless and new options pop up all the time. Financial institutions want your business and they will offer quite an array of incentives to get it. From a consumer perspective that can be both good and bad. Of course you want to carry a credit card that offers you a lot of additional benefits aside from the obvious one of being able to charge your purchases. But comparing all of those benefits can quickly become overwhelming when looking for a new credit card.
Here are the most important things to consider when looking for a new credit card.
Financial institutions figure that an easy way to win you over as a new customer is to entice you by offering you a very low interest rate for your first 6 to 12 months. Some will offer you 0% and some will offer you 5 or 6% on any outstanding balance from purchases that you make during those initial months.
Now if you stay on top of things, and are able to pay off your purchases in full before the introductory period ends, then you are fine. However, if your low interest rate time frame runs out and you still have a balance owing, you will begin to see higher interest charges based on their standard interest rate. In many cases that standard rate is 19%, so be careful.
Credit Card Interest Rates
Interest rates vary from one lender to another. The average interest rate is 19.99%, but you will find credit cards that offer you lower interest rates such as 10.99% or 12.99%. If you are the type of consumer that typically carries a balance owing on their credit card then finding a lower interest rate may be important to you.
Can You Carry a Balance Owing?
This may seem like a silly question but some credit card companies do not allow you to carry an outstanding balance. The first one that comes to mind is American Express. When you use one of their credit cards you may be expected to pay your amount owing in full at the end of every month. Not all American Express cards allow revolving credit.
The Annual Fee
Some companies waive their annual fee for the first year, some do not. The annual fee is something that you want to pay close attention to. In some cases it can be quite high, such as $175. However, some companies no longer charge an annual fee.
If you carry a credit card that does charge an annual fee you need to understand that you will be charged that fee whether you use your card or not.
Credit Card Limits
The credit limit that you are given when you receive a new credit card will be based on a several things. Your credit score will be taken into account, as well as your employment record.
There will be cases where the financial institution starts everyone off at a specific credit limit such as $5,000, and then your limit increases based on your spending habits.
Reward points and cash back are very popular these days. Depending on the card you use you can get anywhere from 1% to 5% cash back on certain purchases that you make.
As well, you will typically be offered 25,000 to 50,000 points just for signing up for a new credit card. These points can be redeemed for travel, or they can be used to purchase a variety of products.
Credit Card Benefits
Certain credit cards will include benefits such as roadside assistance, travel accident insurance and car rental insurance. Some will also offer extended warranties on any products that you purchase with their credit card.
Fraud protection is one of the most important things to take into consideration when looking for a new credit card. You want to deal with a financial institution that assists you in dealing with fraudulent charges on your account. Look for a company that will reimburse you for any transactions that you did not do, and will deal with the fraud on your behalf. Credit card fraud happens everyday and you need that sense of security when you carry a credit card.
Reputable Financial Institution
Deal with a company that you recognize as having a good reputation when looking for a new credit card.
In most cases this will not be an issue, but for someone with a poor credit score it could be an issue. You see new companies are popping up all the time to offer credit cards to those with poor credit scores. They prey on desperation, which could potentially turn into a nightmare for a consumer.
The first company you want to approach is your local bank that you have always dealt with. From there you can shop around, as long as you keep the above points in mind.