You've made up your mind to shop around for a new credit card. But what should you look for when comparing credit card deals? Use the following guide to decipher the fine print found in credit card terms because not all cards are created equal.
Look at all credit card ratesThe first thing most people want to know when comparing credit card deals is what is the interest rate? When looking at credit card rates, it's important to get the annual percentage rate (APR). The APR is the interest rate you pay on an annual basis when carrying over balances from month to month. The APR may vary based upon the prime rate. When reading the credit card terms you may see several APRs listed. The APR you actually receive depends upon things such as your credit score, income, and current debt. You also may see an introductory APR that only lasts for a few months, a balance transfer APR, and a rate for cash advances. Cash advance and balance transfer APRs are often higher than the rate for regular purchases. Balance transfers and cash advances usually involve a fee in addition to the higher APR. Even if you get credit card offers for 0% APR on balance transfers, you should expect to pay a fee.
Penalty APRCredit card companies will generally impose a penalty APR, which is higher than the regular rate, if you miss two or more consecutive payments. However, some card issuers have the ability to raise your rate if you are even one day late. Your credit card rate also may be increased if you go over the credit limit or have a payment returned. If a penalty APR goes into effect, the credit card company must disclose how long the penalty APR will last, provided all minimum payments are made on time.
Avoid paying interestJust because you use a credit card doesn't mean you have to get stuck with huge interest payments. Get in the practice of paying off your credit card bill in full each month and you won't pay interest. If you carry a balance each month, you end up paying interest even if the balance is very small. That's because most credit card companies have a minimum interest charge.
The credit card terms have everything you need to know about interest payments on any credit card you are considering. Read through them carefully and call credit card companies to clarify anything you don't understand before signing up for an account.