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