Things to know when applying
for a credit card
It’s all in the fine print!
Buried in all the glossy promotional captions that
accompany credit card offers are the terms and
conditions, which spell out the most important
information about every card. Here are some of the
details that should help you pick out the best card in
the giant maze of solicitors.
Application Fees, Annual Fees, and Late Fees
Application and/or Annual fees are charged by some
issues and usually range form $0 to up to $100.
Late fees are charged by all issuers and could
significantly increase the balance owed.
Interest Rates (APR)
Your interest rate or finance charge, often
represented in form of an annual percentage rate
(APR), represents the cost of your loan. The higher
the rate, the higher the amount you will have to
payoff the loan. Rates usually range from about
10-20%.
Here are a few
important considerations as far as rates go:
Variable vs.
Fixed: A variable rate is based on the prime rate and
therefore changes with economic conditions. Meanwhile
a fixed rate is stable and gives you a steadier
long-term picture of your loan.
- Intro-/promo- rate vs. the go-to rate: Most credit
card companies try to lure you in by offering some
‘teaser rate’ that usually shoots-up after a
stated promotional period. It is therefore important
to pay more attention to the go-to rate.
- Purchases, Cash-Advances and Balance transfers:
Depending on how you use your card, there may be a
different applicable rate. Rates are usually higher
for cash-advances and lower for balance transfers.
- Grace period
- This represents a ‘free’ period within which
your balance can be paid off, in order to avoid paying
any interest.
-
A particular brand i.e. VISA, MasterCard (MC),
DISCOVER, or American Express (AMEX), may be accepted
in more locations and may have different terms from
the others.
- A good example is American Express charge cards that
require the entire balance to be paid off by the end
of the grace period.
