How to choose a credit card

Your credit score may just be a little number, but it packs a big punch. A low credit score can keep you from getting a car loan or mortgage. In addition, your credit score may haunt you for a long time if it suddenly drops. If you have good credit scores, defintely it opens more doors for you. This is only one reason why it is essential to think about which credit card you apply for before you do.

Every time you apply for a credit card, the company has to check your credit score. This is a bad thing. Several inquiries from your credit card companies look bad on your credit reprt because it looks as though you are rushing to open a credit line, which can be a sign that you are struggling financially. Certainly, this may not be the case. However, credit scoring companies all look at it the same way.

To avoid scarring you credt score with credit card applications by chooisng the right card. Choose a card that matches your lifestyle and works for you instead of against you. If you plan to pay off your balance each month, you might want a charge card instead of a credit card. American Express offers a lot of charge cards with flexible spending plans that are perfect for people who plan to pay off their balance every motnh. They also offer some flexibility so that if you have an emergency you can use the card and pay off large charges over time. Most credit cards offer reward points everytime you use the card. On the contrary, American Express charges an annual membership fee for having the card.

If you seldom use the card but with plans to make big purchases, which requires you to pay off overtime you rather get another card which allows you to carry big balance overtime. Definitely these cards requires you to pay interest each time you purchase. Interest rate can get very high.

Other kinds of cards include:

1) A check guarantee card, issued by your bank, that you can use to ensure that your cheque will be honoured up to a certain limit.

2) A debit card, issued by your bank, where whatever you spend is immediately deducted from your bank account

Do you need a credit card?

a) A credit card means you don’t need to have big amounts of money around and risk of losing it.

b) A credit card means you can purchase items over the internet.

c) A credit card means you can buy abroad without having to worry about local currency.

d) A credit card gives the opportunity to spread the cost of a large payment over several months.

e) A credit card is useful in an emergency. For example, an unexpected repair to your house or car.

What You Need To Consider:

1) APR (Annual Percentage Rate)

This is the interest rate that you will pay on any outstanding balance.

2) Special Introductory Rates

You may be offered a low or 0% rate of interest for a limited time (Up to 6 months) when you sign up for a new card. A higher rate of interest may be charged for cash withdrawals.

3) Balance Transfer Rate

Card companies sometimes offer a lower interest if you swap your balance from another credit card to theirs.

4) Interest Free period

Remember to check when interest payments will begin. Will you pay interest from the day of the purchase? Or will you have a number of days interest free before you begin to pay? For cash withdrawals, there is usually no interest free period.

5) Cashbacks & Rewards

Everytime you spent pound on your credit card you earn points or rewards. Make sure that these are appropriate for you. For example, there&’s no use collecting airmiles if you never fly.

6) Minimum Repayment

Always check what the minimum monthly repayment will be. If you borrow £1000 on your credit card the monthly minimum repayment will probably be in the region of £25. But if you only pay this amount each month it will take a long time to pay off the balance and cost a lot in total when you include the interest payments.

7) Yearly Fees

This is the fee that the credit card company will charge you yearly for using their credit card. Not all credit cards have an annual fee, so remember to consider this when you are choosing which one is right for you.

Delayed Payments

There will be an extra charge, as well as the interest owed, if your payment is late. This charge may even be more than the amount you owe so be very careful to check what the charge is, and to ensure that all your payments are made on time. A good way of doing this is to set up a direct debit from your current account.

9) Exceeding Your Limit

You get also additional charge if you exceed your credit limit.

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Technorati Tags: credit, credit cards, credit fees, Credit Score

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