New rules for credit card companies that took effect this year provide some protections for consumers, but its still important to comparison shop before choosing a new credit card.
Choosing the right card can save you money on interest and fees, and may even provide some perks. Just be sure you shop around to find the best combination of features available for you, advises Mike Hilton, vice president of Traditional Bank in Frenchburg, Ky. (pop. 551).
Here are some issues to consider:
Percentage rates. If you expect to carry a balance, choose a card with a low interest rate. Investigate the annual percentage rate (APR) terms for purchases, cash advances, delinquency and special offers. Be aware that a card with a low introductory rate carries a higher APR after the initial promotion expires.
Fees. Be sure you comprehend all the fees associated with the credit card. Late payment, cash advance and over-limit fees can add up quickly. No annual fee is best, Hilton says, and other fees should be reasonable or nonexistent.
Grace period. The number of days you have to pay your credit card bill in full without incurring a finance charge is the grace period. Many companies allow 30 days. But if you carry a balance, you may not have a grace period for new purchases and may be charged interest each time you make a purchase.
Special incentives. Card issuers often entice consumers with perks such as airline miles, rebates on purchases or additional warranty coverage on items purchased. I switched cards to get airline miles, says Marie Benesh, 54, of Bath, N.Y. Its amazing how quickly I build up enough for upgrades and tickets. Be sure you understand the cardholder agreement. If you are late with a payment, you could lose your points or incentives.