Don't Choose Your Credit Card Until You Read This

It’s difficult to do without a credit card these days – this piece of plastic not only saves you from carrying bundles of cash everywhere and provides you with perks and benefits such as cash-back and travel points. However, given that different individuals have different needs and different spending patterns, it is obvious that the same credit card that works so wonderfully well for your friend or co-worker may not work as well for you. So, among the hundreds of credit cards available in the market, how do you choose one that’s best for you? Let’s find out.

1. Figure out the type of card that you want: There are various kinds of cards available in the market that offer the following benefits:

• Balance transfer cards are meant for those who have existing high levels of debt and are looking to pay it off. For a certain fee, you can transfer your balance from high interest cards to these cards and then pay it off during the introductory period, when the interest charges are nil.
• Rewards: These can be in the form of a sign-up bonus, cash-back, points, or travel miles. This type of perk is best suited for those who are disciplined when it comes to paying off their balance in full every month.
• Secured credit cards: These are meant for those who are looking to build or rebuild their credit score. You get a credit line that’s usually equal to an initial security deposit. As you make payments on time, your activity gets reported to credit bureaus. This, in turn, boosts your credit score.

2. Understand the types of fees you may be charged: Some of the most common ones are:

• Annual fee – You need to pay this once a year. Cards with such fees usually offer greater rewards and privileges compared to those without annual fees.
• Foreign transaction fee – Some cards charge you 3-4% of the charges you make overseas as fees – this is known as foreign transaction fees. Such cards are not advisable for those who frequently travel overseas.
• Late payment fee – Most cards charge a late payment fee of $35 if you forget to make payments on time.
• Cash advance fee – With certain cards, you can take a cash advance via ATM or bank branch. But for this facility, you will need to pay a cash advance fee - and with no grace period.

3. Understand the cost of financing purchases: Whenever you use your credit card, you should pay off the balance before the due date to avoid incurring interest charges. However, it is advisable to know how your interest accrues. Most cards charge a variable rate, and interest is usually charged on the average daily balance. Consider the following example. Let’s say your interest rate is 10%, the balance owed is $4,000 and you pay off $3,000 eight days before the due date. In this case:

               Average daily balance: (4,000 x 22) + (1,000 x 8) = 96,000 / 30 = $3,200

               Daily interest rate: 10% / 360 = .00028 (some issuers use 365 days)

               So, the interest charged = 3,200 x .00028 x 30 = $26.88

4. Consider the rewards program: If you are not much of a traveler, there’s no point in signing up for a card that awards travel miles for every dollar you spend. Moreover, many cards offer high cash-back rewards for spending in certain categories such as gas and groceries. Choose a card that rewards you for your spending pattern. For this you must research the types of rewards offered before signing up for a card. In addition, go over the perks offered – for example, some cards offer price and purchase protection, while others offer travel benefits, such as lost baggage protection.

5. Evaluate retailer acceptance: Out of the four major payment networks, Visa and Mastercard are more commonly accepted than Discover and American Express, so take this into consideration before you apply for a card - just in case you live somewhere or travel where Discover and American Express are not widely accepted.

6. See if you qualify for the card: Most credit cards have qualifiers in place, such as credit score, so do your research and apply for only those cards for which you are likely to get approved.

7. Read the fine print: Many credit cards have terms and conditions in place, for example, some allow for repossession of the items you purchased via the card if you don’t pay off your bills. Understand all of these stipulations before you apply for a card.

By following the steps mentioned above, you’ll be able to zero in on a credit card that is ideal for your needs – whether it is accruing rewards, or using your credit card to take out a temporary loan. However, if it is temporary financing that you are after, there is another option – our team at Fund&Grow offers individuals with good credit the opportunity to obtain as much as $250,000 of unsecured credit at 0% interest for a period of 6, 12, or 18 months. This amount can be used for anything – from financing a small business to providing a down payment on a property. So, if you need such funds, call us at (800) 996-0270, and we will help you out right away!