In recent decades, our society has grown from a cash-based economy to one that lives on debt. While credit cards can be useful in a tight situation, these pieces of plastic should raise a certain amount of caution as they are chosen and while they are being used. No matter the situation, analyzing credit cards should be done on a case by case basis. This process isn’t easy, but it shouldn’t be terribly difficult either. With the right tools and a proper state of mind, you should be able to compare your options and choose the right credit card for you.
Read the whole contract
Many credit card companies hire lawyers to twist contracts and trick consumers into signing an agreement that will not benefit the cardholder. The interest rate you see on an envelope or in a letter sent to you by a credit card company may offer you one great interest rate, but in the fine print of your contract it may state that this rate only applies when you repay your credit card bill on time and when you do not default on any kind of loan. Reading your entire contract and truly understanding its contents have always been the best ways to catch these ruthless credit card companies before you agree to their terms.
Compare the details of your potential new credit cards
After you have read through the contracts and you are sure that the companies you are considering are not trying to fool you or get more of your money than necessary, then you can start to compare some of the details of the credit cards. You may even be able to find some loopholes in the contracts, which will then affect your analysis.
- Interest rates – Interest rates are the key to good or bad credit. Some credit card companies could change the interest rate on your card after you have used it to make purchases. If you aren’t careful, you could end up paying much more than the initial cost of an item because the interest rate on your card is so high. You should know what your interest rate will be before and after a late payment. If you don’t, you could end up going deeper into debt.
- Annual fees – Consider all other details of a credit card before you say no to one with a high annual fee. Consider the amount and whether or not that money could be put to better use. If the fee is worth the perks of the card, than you could keep that option open.
- Grace periods – These determine how many days you are allowed before late fees and extra penalties are charged to the late payment. A longer grace period will be beneficial for any consumer.
- Late fees – This detail should especially be considered by those who have trouble making payments on many loans. Obviously, a lower late fee will always be better.
Reward programs are a plus
Credit card reward programs can be a huge benefit, but they shouldn’t keep you from considering all of the other terms of the card. Most companies will discontinue your rewards when you are late on a payment or restrict the location for the program, causing those who live in certain states to have fewer privileges than cardholders in other states.
Reward programs could allow you to have access to free merchandise, gift cards, cash back, and many other opportunities as you spend with your credit card. However, it is important to remember that using the card and consolidating other debts to earn points, miles, or other rewards will only hurt your credit long-term. You don’t want to rack up debt just to get rewards.