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Credit Card Offers and Comparison Shopping

Francine L. Huff
LoanBiz Columnist

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With all the credit card offers being mailed to consumers, it can be confusing to know which ones are a good deal. While credit card interest rates are important, there are other pieces to the equation that can't be ignored. Here's a checklist for comparing credit cards.

Credit Card APR

When evaluating offers from different credit card companies it's important to look at the annual percentage rate (APR). This is the amount of credit card interest that will be charged if people carry a balance from month to month. APRs can vary for purchases, cash advances, and balance transfers. People who get an introductory interest rate when they first sign up for a credit card must make sure they know what the APR will be after that period. Some credit cards have tiered APRs, with different interest rates applied depending upon the level of the outstanding balance. For instance, balances over $1,000 may have a higher interest rate than balances lower than that amount.

Billing Cycles

To avoid paying bills late it's important to understand credit card billing cycles. Most credit card companies have grace periods of 20 to 30 days. That means that customers have that many days to pay their bill before finance charges are calculated. Generally, the grace period applies to new purchases, not balance transfers or cash advances. Some credit cards also don't have a grace period for new purchases if a balance was carried over from the preceding month, so interest begins accumulating right away.

Fees Gone Wild

Having a credit card usually involves a laundry list of fees. Among those charges are annual fees just for having a card and late fees for missing payment deadlines. But many cards also have fees for going over the credit limit, bouncing a check when making a payment, and asking for a credit limit increase. Some credit card companies even charge customers for paying their bill by phone and other customer services. Many people are persuaded to apply for a new credit card because of a balance transfer offer. But balance transfers usually involve a fee, as do cash advances.

Reading the fine print of credit card offers should give people all the information they need to comparison shop. Instead of accepting the first offer they receive in the mail, people should take time to sift through information about different cards and choose the one that offers the best overall package.

Sources
Federal Reserve


About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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