Choose Your Credit Card Wisely Credit cards are readily available these days. If what fees are associated with a particular cardʼs youʼre like most, you probably receive offers on a transfer offer. Most cards charge hefty fees for regular basis. But, rather than agreeing to any card balance transfers, making the offer much less that comes your way, it is important to be proactive worthwhile. and research which card fits your needs. Here are a few helpful tips to keep in mind to ensure youʼre What You’ll Owe using the best card for your financial situation. Make sure you have a good understanding of the fees, charges and interest you may incur. These How Will I Use the Card? things can make a significant difference in what you This is an important question to ask before selecting will owe to the credit card company. Some of the a card. Consider the following: most common fees and charges are: • Is the card for business or personal use? • Finance charge: This is interest that accrues on • Will I pay off the balance regularly or carry your outstanding balance as a fee for carrying that a balance? balance. Typically it is charged monthly and is a • Will I use the card for everyday purchases percentage of what you owe. or only for emergencies? • Annual fee: These also might be called member- • Do I want a card with rewards such as points ship fee, participation fee, activation fee, acceptance or airline miles? fee or monthly maintenance fee. Different cards • How much money would I like available to me? charge the fee at different times and in different amounts. Do your homework—a one-time fee of $20 is obviously a lot less than an annual fee of $100. Annual Percentage Rate (APR) If you plan to carry a balance on your card, the APR is one of the most important considerations. • Transaction fees: Most cards charge for cash This is the rate of interest youʼll be charged on the advances, late payments or exceeding your balance you carry. It will be expressed in an annual credit limit. Compare the amounts charged before rate which may vary based on your credit score and making your final decision about which card to use. history. If you plan to carry a balance, you want the According to U.S. law, credit card companies lowest APR possible. must display a “Schumer box” that lists the most common fees in an easy-to-read format, making Balance Transfers it easier for consumers to compare and make Balance transfers can be a very attractive benefit. an educated decision. This allows you to move a balance from one card to • Foreign transaction fee: If youʼre someone who another—usually from a high-rate card to one with travels abroad frequently, youʼll want to pay attention a lower APR. Not everyone offers this so if youʼre to this fee. This is a fee charged for transactions in interested, shop around for those who do—but be a foreign currency—shop around for a good deal. sure to read the fine print. It is important to know –more– that can have great terms and conditions. There also is a wealth of information on the Internet. Points and Special Rewards Points, airline miles and special giveaways can be Visit www.creditcards.com and www.creditcard an attractive lure. However, like everything else, you guide.com to compare offers, fees, reward must do careful homework to determine if it is really programs and APRs. best for your situation. If you only plan to use the card for emergencies and the airline mile card you want comes with a hefty annual fee, you need to Credit Limits Some people have credit limits of $500, whereas weigh the costs. By the time you accumulate enough others are $50,000. Again, it is important to consider miles and pay the fee annually, you may have been how you plan to use your card. If you plan to pay for able to buy the airline ticket outright. Conversely, if business expenses or are looking to improve your you pay your balance monthly and use your card credit score, youʼll likely need a larger limit. Remem- for almost everything, a rewards card really can be ber that your credit score improves with the amount a great way to take advantage of special perks— of available credit you have, so a higher limit on your everything from free gas and travel to specialty credit card can help your credit score depending on merchandise. the balance you carry. However, if you only want the card for minor purchases and are worried youʼll be tempted to overspend, consider a smaller limit. Other Important Considerations Most people are probably very familiar with the “big players” in the credit card industry. MasterCard, No matter what card you ultimately choose, it is Visa and American Express are accepted at millions important to remember that a credit card is not free of merchants worldwide. If you go with another card, money. Learning how to responsibly manage credit educate yourself about where you can and cannot card spending is a valuable lesson. If managed use it. correctly, credit cards can help you build your credit score and pay for things you need. On the flip side, With all the options available, itʼs easy to get mismanagement of credit cards can lead down confused. If youʼre overwhelmed, ask someone a road of debt and damaged credit scores. Itʼs you trust—friends, family and co-workers can be important to always be vigilant and educated about great resources. Also consult your credit union. decisions affecting your financial well-being. Most financial institutions offer their own credit card This information is compiled courtesy of Tigers Credit Union on the campus of the University of Missouri–Columbia. For more information, contact us at (573) 443-8462 or stop by our office on the lower level of Brady Student Commons.