When evaluating credit card offers, here are some things to keep in mind:
APR – APRs can vary greatly among credit cards. Some credit cards offer introductory APRs that start low then go up after a few months, which is something you may want to consider if you plan to pay off a balance over time. Keep in mind that even a fixed rate can go up if you miss or are late on even a single payment.
Grace Period – A grace period is the number of days you have to pay your bill in full without triggering a finance charge. Most credit cards offer a grace period of 20 to 25 days on purchases which, if you pay your balance in full each month before the due date, can effectively act as an interest-free loan. However, this is not true of all credit cards, so even if you pay in full each month, you could still end up paying interest. Also, on most credit cards, if you are late on a payment or if you do not pay your bill in full, the grace period goes away and interest is charged from the date the purchase was made. It’s another good reason to always pay on time.
Annual Fee – Some credit cards charge an annual fee, which typically runs between $25 to $50. However, credit cards marketed to consumers with poor credit can have fees that run much higher. If you plan to use your credit card frequently in order to collect frequent flier miles or merchandise points, then an annual fee may be worthwhile. Otherwise, you may want to look for a credit card that doesn’t charge one.
Credit Limit – Be aware of your credit card’s credit limit and don’t go over it, or you may be charged a penalty fee and, in all likelihood, your APR could go up. It may also lower your credit score. Therefore, it is ideal to keep your balance well below your limit.
Cash Advances – APRs for cash advances are typically higher than for regular purchases. Since you are only allowed to pay off these balances after you’ve already paid off your regular-purchase balances, you may be paying on this higher-interest part of your debt for a long time if your overall balance is high. Also, keep in mind that, unlike standard purchases, most credit cards offer no grace period on cash advances, so even if you pay off your balance in full each month, you’ll still pay interest on a cash advance.
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