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Friday, December 15, 2017
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Credit Cards

Shopping around for a credit card can save you money on interest and fees. You’ll want to find one with features that match your needs. This information can help you
How will you use your credit card?
The first step in choosing a credit card is thinking about how you will use it.
  • If you expect to always pay your monthly bill in full--and other features such as frequent flyer miles don’t interest you--your best choice may be a card that has no annual fee and offers a longer grace period.
  • If you sometimes carry over a balance from month to month, you may be more interested in a card that carries a lower interest rate (stated as an annual percentage rate, or APR).
  • If you expect to use your card to get cash advances, you’ll want to look for a card that carries a lower APR and lower fees on cash advances. Some cards charge a higher APR for cash advances than for purchases.
When applying for credit cards, it’s important to shop around. Fees, charges, interest rates and benefits can vary drastically among credit card issuers. And, in some cases, credit cards might seem like great deals until you read the fine print and disclosures. When you’re trying to find the credit card that’s right for you, look at the:
  • APR
  • Grace Period
  • Annual Fees and other charges
APR
The annual percentage rate – APR - is the way of stating the interest rate you will pay if you carry over a balance, take out a cash advance, or transfer a balance from another card. The APR states the interest rate as a yearly rate.
Multiple APRs
A single credit card may have several APRs:
  • One APR for purchases, another for cash advances, and yet another for balance transfers. The APRs for cash advances and balance transfers often are higher than the APR for purchases (for example, 14% for purchases, 18% for cash advances, and 19% for balance transfers).
  • Tiered APRs. Different rates are applied to different levels of the outstanding balance (for example, 16% on balances of $1–$500 and 17% on balances above $500).
  • A penalty APR. The APR may increase if you are late in making payments. For example, your card agreement may say, “If your payment arrives more than ten days late two times within a six-month period, the penalty rate will apply.”
  • An introductory APR. A different rate will apply after the introductory rate expires.
  • A delayed APR. A different rate will apply in the future. For example, a card may advertise that there is “no interest until next March.” Look for the APR that will be in effect after March.
If you carry over a part of your balance from month to month, even a small difference in the APR can make a big difference in how much you will pay over a year.
Fixed vs. variable APR
Some credit cards are “fixed rate” - the APR doesn’t change, or at least doesn’t change often. Even the APR on a “fixed rate” credit card can change over time. However, the credit card company must tell you before increasing the fixed APR.
Other credit cards are “variable rate” - the APR changes from time to time. The rate is usually tied to another interest rate, such as the prime rate or the Treasury bill rate. If the other rate changes, the rate on your card may change, too. Look for information on the credit card application and in the credit card agreement to see how often your card’s APR may change (the agreement is like a contract--it lists the terms and conditions for using your credit card).
Grace Period
In relation to credit cards, a grace period is the number of days you have before a credit card company starts to charge you interest on new credit purchases. It is the time between the closing date of the billing cycle and the due date, or date by which you have to pay the balance in full and avoid finance charges. Most grace periods are 20 to 25 days.
You should be concerned about the grace period because it can have a big impact on the amount you pay in finance charges for using a credit card. Most credit cards have a grace period. However, you benefit from the grace period only if you pay the entire balance in full by the due date.
Credit Limit
The credit limit is the maximum total amount--for purchases, cash advances, balance transfers, fees, and finance charges--you may charge on your credit card. If you go over this limit, you may have to pay an “over-the-credit-limit fee.”
Finally, if you have a credit card, take the following precautions:
  • Never lend it to anyone.
  • Never sign a blank charge slip. Draw lines through blank spaces on charge slips above the total so the amount can’t be changed.
  • Never put your account number on the outside of an envelope or on a postcard.
  • Always be cautious about disclosing your account number on the telephone unless you know the person you’re dealing with represents a reputable company.
  • Always carry only the cards you anticipate using to prevent the possible loss or theft of all your cards or identification.
  • Always report lost or stolen ATM and credit cards to the card issuers as soon as possible. Follow up with a letter that includes your account number, when you noticed the card was missing, and when you first reported the loss.
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