Making Credit Cards Work for You

Recently, some credit card issuers have taken measures to turn credit cards into a burden by arbitrarily increasing rates and penalties or lowering limits. These actions might make the idea of using or getting a credit card intimidating. It doesn’t have to be that way, as not all credit cards are the same. Here are four basic issues to examine closely when looking for, or using, a credit card:

What are the Fees?

Be aware of any fees and how or when they are applied. Minimize them as much as possible. The most common types of fees include the annual fee, late fee and over-the-limit fee. There can be fees for paying your account over the phone, making a balance transfer, requesting additional copies of your statement, or for taking cash from an ATM machine.

What is the Length of the Grace Period?

The grace period is the amount of time allowed to pay a balance in full. After that, a finance charge is added. It is usually expressed in days, starting from the billing date, i.e. “25 days from the billing date.” It’s better to have a longer grace period, since it gives more time to pay a bill without incurring a cost for the basic convenience of using credit.

What’s the Annual Percentage Rate?

The annual percentage rate (APR) is the percentage fee applied to balances that remain on the credit card past the grace period. Also, a rate can be variable or non-variable. The lower the APR, the lower your finance charge will be when you have a remaining balance. Most credit cards have a different APR for purchases, balance transfers, and cash advances. Make sure you know the APR for each.

Are There Rewards?

Some credit cards offer rewards applied to the use of the card in the form of points. Review the reward structure and find out how points accumulate, or what the redemptions are (cash, travel points, etc). Find out if there is an annual fee to participate in a rewards program or if points expire after a certain period of time.