Credit Cards: Picking Your Plastic

Credit Cards: Picking Your Plastic

Pay closest attention to the financial terms – not the perks of the hype

If your mailbox seems to fill up with new credit card offers every time you turn your back, you are not alone. Fueled by a growth in consumer spending over the past few years, the credit card market is booming. Yet while bargains abound, you need to be aware of your own spending patterns to pick the best card for you.

About two-thirds of all Americans regularly carry a monthly credit card balance, and the average unpaid balance hovers over $2,000. For many people, attempting to control their credit card spending is a constant battle. A zero balance for a month or two is frequently followed by a longer period of debt that is carried over at substantial interest rates.

If that’s your pattern, credit cards promising no annual fee probably are not your best option. No-fee cards tend to carry higher interest rates, making them more costly to cardholders who maintain a balance. As a rule, consumers should look for cards with an interest rate calculated at no more than six or seven percentages points above the prime rate.

On the other hand, if you’re among the one-third of cardholders who pay off their balance each month, a no-fee card could be just the ticket. More than half of all bankcards charge no annual fee. In case you come up short one month, you should look for no-fee cards with the lowest rate on unpaid balances.

You may also be tempted by a card that offers perks (say, frequent flier miles) or rebates. Most of these cards have annual fees and high interest rates and you have to be a pretty big spender to accumulate a free tick or a sizable rebate. Bet credit cards experts generally steer people away from cars with lots of bells and whistles. You’re better off just keeping the money in your pocket.

New Jersey. Photo by Elena

In all cases, consumers who are considering transferring their credit card balance to a bank that offers better terms should contact their own car issuer firsts. Banks spend upwards of $200 per customer to attrarct a new account. In this increasingly competitive market they are usually willing to negotiate more attractive terms to retain your business.

Above all, cardholders should be skeptical of pre-approved offers with “teaser” interest rates and fees or fancy perk promotions. The proof is usually in the “fine print” found in the disclosure box printed on the back of most credit card applications. Read it carefully.

Nor is collecting cards a smart idea. Two cards are more than enough formost consumer’s needs.

Your Credit Report

One in four people who review their credit report, find an error. If you have been denied credit within the pas 60 days, you can check on your report at no cost. Send a copy of the denial letter to the credit agency along with your request.

Most Popular and Best Credit Cards

The interest rate chaged can vary, but you’d be wise to check before signing up in all cases: fees and perks for gold cards tend to be higher, but anyway you should check the rank of the biggest credit card issuers, the best low-rate cards, the best cards with no annual fees (the number of credit card issuers that wave their fees continues to increase, but since no fees are included, this means a higher interest rate, and consumers who run a monthly balance should beware). Check on the largest rebate programs, fro merchandise to investments in money markets. To get the greatest benefit, cardholders should plan to make yse of the rebates and charge all of their purchases to their cards. Check the largest frequent flyer cards, as many issuers have generous tie-in programs, and some companies offer mileage points that can be applied to a number of airlines (althogh it takes longer to qualify for rewards). You can also check the best-secured credit cards – indeed, for many, including studens and those with bad or nonexistent credit histoires, getting a credit card is a hurdle. “Secured” card require cardholders to make a deposit to be held as collateral on which interest is paid. Interest rates tend to be high, and credit limits low, but there are dals to be had.

Final note: Today the quickest way to pay your bills is to pay them electronically. The cost of paying with pen and check book is comparable to paying electronically, but the amount of time you spend at least triples.