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Information on mortgages, home equity loans, and consumer credit to help you use the power of financing to your advantage.
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Credit Cards > Consumer Protection
What to look for when you shop for a credit card
AMY BALDWIN, AP Business Writer. Associated Press.
Copyright Associated Press
A: The main thing you need to do is to figure out what kind of credit card user you are, which comes down to whether you carry a balance or pay your bill in full each month.
If you carry a balance, you'll want to look for a card with a low monthly interest rate. If you faithfully pay the balance each month, then you should look for cards with perks you'd enjoy, such as frequent flier miles or cash back on purchases.
You might want to have one of each card _ one for balances you pay and one for bigger expenses or costly, unforeseen expenditures, such as major car repairs. Credit counselors, who warn consumers against taking on too much debt, generally say it is acceptable to have up to three major credit cards.
If you're looking for a card that offers perks, consider that there might be an annual fee and weigh that against the value of the rewards you anticipate getting. These cards often have higher interest rates as well.
"These cards are for people who do not carry a balance because they are going to have a higher rate. And, the benefits you incur don't in any way compensate for the higher rates," said Greg McBride, senior financial strategist at Bankrate.com.
The average annual interest rate, called APR, on credit cards is about 13.27 percent, down from a peak of 17.36 percent in December 2000, McBride said.
It's also important to keep in mind that reward card holders sometimes have to pay annual fees.
"Evaluate the annual fee in terms of your usage. If you won't use the card too much, look for a card without a fee, because you are not going to earn enough (rewards) to offset the fee," McBride said.
If you want a low-rate card, pay attention to the terms of that rate, McBride said. Find out the answers to these questions: How long is the low rate good for? Is it a special, introductory rate used to attract new users? Does the rate apply only to balance transfers, or is it good for future purchases?
If the rate applies only to transferred balances and there's a higher one for new purchases _ and you use the card for both _ there's a good chance the payments you make will be applied to the lower rate, McBride said. That means you could pay heavier interest charges than you expected.
"You can end up trading high-rate debt for high-rate debt," he said.
With any card, remember to read the fine print.
"The smaller the print, the more important the information," McBride said. And, remember, "terms change. So, whenever you get an update to your credit card agreement, it is important to zero in on what is changing."
For help online, you might want to check out Cardweb.com, which each month compiles lists of cards by type _ low-rate, no annual fee, reward cards, etc. The site also has a calculator you can use to figure out how long it will take off to pay off credit card debt, depending on the balance and the interest rate.
Bankrate.com also features stories and advice on credit cards.
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
People: McBride, Greg
Dateline: Undated
Text Word Count 553
The tips on this website should be considered food for thought only. Lendingtips.com is a clearinghouse of ideas, not a professional adviser. Before any important decision, please consult the appropriate professionals (lawyer, accountant, real estate agency, broker etc.).
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• Credit Cards > Consumer Protection Archive
• Credit card payoff Use this calculator to see what it will take to payoff your credit card balance, and what you can change to meet your repayment goals.
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