Personal Finance Link

Choosing the right credit card - features

Applications for credit cards will appear on your credit report and can affect your overall credit. For example, if you apply for too many credit cards within a short period of time, it may be assumed that you are in some sort of financial trouble and are trying to buy your way out with credit cards (which is never wise). You may appear to be financially unstable. Also, having too many credit cards, even unused ones, will increase the ratio of potential debt to income, and make you appear less favorable from a credit standpoint.

This is one reason it is important to select credit card offers carefully before applying. Online resources, such as those offering access to a large number of different credit card options, especially if they provide a good summary of the benefits and features of each card, can be useful in your search for a credit card.

The ability to search by different features can save you time as well. For example, if you don’t plan to use your card often, but rather to keep it just for the sake of emergencies, something like travel miles will be an unimportant feature for you. Instead, you should seek a card that offers credit for the lowest possible cost. The most important factor for a rarely-used card is to choose no annual fee credit cards, because you don’t want to pay a fee for the privilege of holding the card, no matter what other benefits it offers, if you aren’t going to be using it enough for those other benefits to come into play. Of secondary consideration on a card that won’t be used often is the interest rate, because if you DO use it, you want to pay as little as possible for the privilege. Other considerations would be features that don’t depend upon usage, such as a built-in roadside assistance. The least important features in a card you don’t intend to use would be benefits based on dollars spent, such as travel miles, or deferred payments for balance transfers if you don’t intend to use your card for that purpose.

However, if you hope to lower your interest payments, you should have a different set of priorities when evaluating balance transfer credit cards. In this scenario, look first for the introductory APR and the term over which you can keep that rate. You will also need to evaluate the rate beyond that period as well, and factor in any annual fees. Several points of caution: if you plan to use this method to decrease monthly payments, do so sparingly. Constantly flitting from one card to another is another way to make yourself appear to be financially unstable on your credit report. Also, be sure you understand any penalties and the payment cycle. Make sure you can make your payments and make them on time (better yet, pay them just a bit early to be sure), because if you are late on a payment, you will likely pay hefty fees as well as lose your introductory APR. Doing so can make it difficult to obtain another card in order to transfer the balances yet again. Essentially … moving balances between cards in order to save interest fees can be worthwhile in the short run, but you should plan to pay off those debts as quickly as possible rather than maintain credit card debt at any interest rate for the best overall financial security.

Entry Filed under: Credit Card