Credit Card Features
Most of us receive credit card offers in the mail with annoying frequency. When you open one up, there are all sorts of great offers in bold print, hoping to grab your attention and get you signing on the dotted line. The problem is, it all looks so good on paper, but the fine print is the part you really should be reading. That’s where the bits that will come back and bite you later on are hidden. You need to look at ALL the features, fees and charges involved, and then, based on your own usage, decide which card is most appropriate for you. Here are some of the things to consider.
Fees and Charges
The saying “there’s no such thing as a free lunch” is particularly true when it comes to credit cards. So work out exactly what fees you’re likely to be paying, and if it’s possible to avoid them. For example, you may avoid paying interest if you pay the balance off in full each month.
The Annual Fee
When the credit card companies realised that some people really could be disciplined and pay off their balance each month, they discovered they didn’t make any money. So in came the annual fee – basically to make sure you pay them something for the use of their card. The good news is that with the credit card market being so competitive, you can often negotiate to have this fee removed. It’s worth a try!
Cash Advance Fee
Nearly every credit card company will charge you a cash advance fee. Be warned – some of them charge some very hefty cash advance fees. So make sure you’re aware of what the charges are if you expect to use this facility more than once or twice. Quite often the interest rate is higher for cash advances, and sometimes your grace period is waived on cash advances, meaning you pay interest from day one.
If you’re taking up an offer to transfer the balance of an existing credit card to your new card, make sure you read the fine print. Some credit companies treat the transfer as a cash advance, and if they charge you a fee based on a percentage of the advance amount and you transfer a large balance – ouch! And again, check what interest rate they’ll charge you. Sometimes the fees and charges on a balance transfer can make it worse than leaving the balance on your existing card.
Other Fees
Credit companies are very good at coming up with fees for almost everything, so check the fine print and make sure you know what they are. Some things to look out for include over-the-limit fees, late-payment fees, return-item fees and set-up fees. Mostly these can be avoided by careful management, but it’s still handy to be prepared if you ever get charged one.
Rewards
A lot of card companies are now offering reward programs in the hope of keeping your business. Quite often you don’t have to do anything other than use the card whenever you purchase something – points are awarded based on the amount of money that gets charged to your card each month. It’s almost never a good idea to choose a card based on the rewards program. Most of the time you have to spend a very large amount on your card to get any really decent reward, and the last thing you need is to start paying huge interest bills as a consequence of the extra spending.
Incentives
Some credit companies have realised that reward programs are losing favor, and have started to offer other types of incentives. These can include rebates on purchases, extended warranties, or frequent flyer miles. Depending on your personal circumstances, some of these incentives can end up being quite valuable, so it’s worth checking out the details. But again, don’t overspend in the hope of getting a reward, because you almost never win in that scenario.
With any credit card, take the time to understand all the details of the card, not just one feature, and then think about whether the card really suits your own personal usage style. There’s no value to be gained in having features available that you’ll never use, or in choosing a card that costs you more because of the way you use it. Special offers are only special if they help you, not make your situation worse.
