credit card advice
When you’re ready to apply for a new credit card, whether you want to transfer your balance to a card with lower interest or take advantage of a rewards program, there are many factors to consider.
If you ever plan to carry a balance on your credit card, your card’s interest rate — also known as APR — is extremely important. It indicates the percentage of interest you will pay on the balance you carry.
The lower the percentage, the better. Many cards offer introductory interest rates, such as 0% for one year.
Make sure to look at the fine print to see what the APR will be after the introductory period. You will usually see a range. Your exact interest rate will be determined by your credit score.
The better your credit score, the lower your rate will be. If you plan to use your card to make a large purchase, such as furniture or a new TV, go for a card with a long 0% introductory APR period so you will have time to pay off your debt without new interest accruing. It is ideal to pay off the balance before the interest kicks in.
Balance transfer rate
If you have credit card debt on a high-interest card, one way to make progress is to transfer the balance to a card with a lower interest rate.
Before you do this, look for a card with a 0% introductory APR on balance transfers. Pay attention closely to the duration of the introductory period. Some cards offer only six months, while some may offer 18 months.
Read the fine print to make sure you are aware of what the APR will be after the introductory period, and make sure you are prepared to pay it if your balance isn’t paid off by then.
“Make sure you will get
enough benefit from the card.“
Are you looking to use a credit card to earn cash back or airline miles? Reward credit card programs abound.
There are several different types of programs. With cash back cards, you earn back a certain percentage of your spending that you can either use to pay off your balance or receive in a check.
Reward point cards earn points for each dollar you spend that can be redeemed for anything from travel to electronics to gift cards. With airline or miles cards, you earn free flights or hotel stays.
Apply for a card with the type of program you are most likely to use. For example, don’t apply for an American Airlines credit card if you usually fly with Southwest. If you don’t travel often, you are better suited to a general points card than a travel-specific card. If cold hard cash is most useful to you, apply for a cash back card.
Some credit cards, particularly those with generous rewards programs, have annual fees. They are usually between $40 to $100. Many times this fee is waived your first year.
It’s important to make sure you will get enough benefit from the card for it to be worth paying a fee. Try to avoid cards with an annual fee if possible.
If you can’t get around it, carefully examine the benefits and rewards to make sure it will be worth it. For example, if you will earn around $75 cash back per year but the annual fee is $89, you’re losing money on the card.
Even if it looks like you will break even, it may not be worth the trouble. On the other hand, if the annual fee is $50 and you think you can earn a free flight worth $300 that year, it may be a good investment.
Foreign transaction fee
Do you travel internationally? Many credit cards have a foreign transaction fee, which is a fee of around 3 to 5 percent on all purchases made in foreign currency.
It won’t make a major impact on small purchases, but it will add up over a lengthy international trip, especially for large expenses such as hotel stays.
If you don’t have a trip abroad planned in the near future, a credit card with a foreign transaction fee won’t make a difference. If you do like to travel, look for a card with no foreign transaction fee.
All Capital One cards lack this fee and select cards with other issuers can be found without it.