There is an endless stream of credit card offers assaulting consumers in today’s world. On television, over the internet, and in the mail, credit card offers come from all directions all the time. The question is; which card is going to work the best?
Credit Score Determines Most Decisions on Credit Cards
The three basic divisions of credit scores, excellent, fair, and poor are the greatest determining factors in deciding on a credit card. Obviously, someone with a low credit score probably won’t qualify for an American Express Black card. And a consumer with a high score has a choice of hundreds of cards to choose from. Knowing the credit score can help narrow down the possibilities and provide some guidance toward making the best selection.
10 Things to Consider When Choosing a Credit Card
When a cardholder goes shopping for a new credit card provider, they should spend a little time thinking about the following items:
1) Is the credit score rising, falling or staying about the same?
2) What kind of interest rate will be charged – now and in the future?
3) What types of card benefits are most important?
4) Is the credit provider a national company, regional bank or local bank?
5) What experience have other cardholders had with the credit provider?
6) Is this card going to replace another card or is it an additional card?
7) Who is going to use the card?
8) What types of purchases will be made with the card?
9) Where is the card going to be used?
10) When is the card going to be used?
These may seem like fairly innocuous questions, but the answers and the details can make the difference between having a card that meets all needs or a card that falls short, costs more, and leaves the cardholder wanting.
If a consumer’s credit score is on the rise, that’s a good thing. However, when adding a credit card to the credit history, the additional card can have an effect on the score. If the card is replacing another card, there shouldn’t be much adjustment to the number. But if the card is in addition to other cards, the credit can be affected in a negative way … at least for a while. Additional lines of credit affect a consumer’s net worth and credit scorers review available credit to used credit to determine a credit score. If the other credit cards are holding high balances, a new card won’t improve the score. If the other credit cards show payments that reduce the balance significantly, demonstrating the cardholder pays more than the minimum payment, the new card won’t have as much effect.
Introductory rates are a wonderful thing, but time passes and the honeymoon ends. Some 0% interest cards jump up to 9.99% – 14.99%. That’s not the kind of value most consumers feel good about. Local bank and credit union cards tend to have lower interest rates in the long run, but they require additional paperwork and time to process. In most cases, it’s worth the time and effort. Regional providers don’t have as much up-front work to do, but they won’t have as low an interest rate either. National credit issuers go strictly off the credit score and their introductory rates can quickly turn into some of the highest interest credit on the market – upwards of 14.99% to 29.99%. Once again, it’s the credit score that drives the bus and consumers have to investigate multiple sources to determine which provider will do the best job keeping the interest rate down.
Types of Credit Cards
Credit cards come in all sizes and shapes. Department store cards, tire store cards, and other specific cards exist to be used only with a particular retailer. Visa, MasterCard, American Express, and Discover cards can be used in some places and not in others. Prepaid cards, secured cards, debit cards, and re-loadable cards are available for less-than-perfect credit customers. Each type of card has pluses and minuses. It is up to the consumer to decide which card satisfies their need.
National, Regional or Local … They’re Not the Same
Credit cards are very similar to twins or triplets … they might look alike, but underneath, they can be completely different personalities. Consumers are cautioned to read the terms and conditions that accompany each card. Late fees, over limit fees, payment cycles, adjustable interest rates based on payment history, and a myriad of other details must be explored as thoroughly as possible before committing to a card. Some providers jump up the interest rate if one payment is made late. Other providers charge fees even for charges that are denied due to high balances. A little investigation should help avoid these pitfalls.
It doesn’t hurt to check out the satisfaction prior cardholders have had with a specific credit provider. The internet has websites which allow cardholders to post their comments on credit cards. And it doesn’t hurt to check out the Better Business Bureau rating on the card issuers either.
Replace or Add-on?
If the card is going to replace an existing card, for balance transfers or better interest rates or more benefits, make sure the old card doesn’t offer the same programs or better. Most credit card companies don’t like losing customers, so it is a good idea to make a phone call and find out if the old credit provider can do the same job as the new one.
Who Is the User?
If the primary user for the credit card is a college student, certain restrictions should be put in place to avoid additional fees and charges. And if the primary user is a senior who just needs a back-up card for travel needs, the benefits for travelers are going to be critical. Determining the user will help decide which card will be most useful and appropriate.
Types of Purchases
If a credit card is going to be used just for buying gas when a salesman is traveling, then it might be a good idea to get a fuel company card rather than another Visa. If the purchases are going to be high dollar items, the extended warranty and damage insurance benefits are going to be important. Consumers should consider what is going to be purchased with the card before making a decision on the provider.
Where the Card Will Be Used?
Once again, if the card is going to be used for international travel, make sure it doesn’t have additional fees and conditions for purchases made overseas. If the credit card will be used around town and on an occasional excursion out of state, the international benefits aren’t going to be a factor. Cardholders should scrutinize the terms and conditions for the locations they expect to use the card, to be sure it gives them the best benefits.
When Will the Card Get Used?
If a consumer only uses credit cards for convenience and pays off the balance at the end of each month, then it is important to make sure there is sufficient cycle time for accruing the least amount of interest in the interim. Also, if the card is only used for Christmas purchases and not during the rest of the year, cardholders should check the terms and conditions to see if their lack of use during the remainder of the year is going to trigger higher interest, more fees, or even result in the card being cancelled for non-use.
Choices, Choices, Choices
Credit card companies want their customers to use their card appropriately, intelligently, and with the least conflict possible. Consumers need to do a little homework and some investigation to make sure they are getting the best card for their individual needs. Some matches are made in heaven … bad matches put consumers at a definite disadvantage and can cost more than just time and frustration.