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How to Compare Credit Card Offers

If you are in the market for a new credit card or perhaps have a stack of applications you've received in the mail, choosing the right one may seem like a nearly impossible task. But it doesn't really have to be a stressful experience. With a little time, patience, and a good look at your personal finances, deciding on the perfect credit card can be a relatively easy decision.

Lenders typically don't divulge the specifics about their approval requirements. But generally speaking, the type of offer you receive is strongly tied to your credit score. Lenders look at your credit history as a means of establishing your creditworthiness. Applicants with high credit scores usually receive the best rates and terms. Reversely, those individuals with less-than-perfect credit tend to qualify for higher interest rate credit cards with less favorable terms.

Before applying for new credit it is a good idea to first check your personal credit report and also learn your credit score. These are two separate entities and a credit report may not give you your actual credit score. Another reason to check your report (at least once a year is suggested) is to verify that all of the information contained in it is accurate. If you find credit information which you feel is not correct or up-to-date, you have the right to file a dispute. You will be required to provide supporting evidence of your claim but credit reporting companies are obligated by law to remove outdated or incorrect information from your credit report when presented with the proper documentation showing otherwise.

What to Consider

When it comes to credit cards, one size definitely does not fit all. Consumers have a wide variety of cards to choose from, each with different terms, conditions, and benefits. Lenders even gear certain ones towards specific groups of people, such as high-income earners, students, individuals with blemished credit histories (such as a bankruptcy), or people who are trying to establish credit for the first time.

It's important to remember that having a credit card is a serious financial obligation. Millions of credit card holders have found out the hard way that it is very easy to overspend when charging new purchases. For this reason, any time you take on additional credit you should also be aware of the financial responsibility that goes along with it.

Make sure you read and understand all of the terms and conditions associated with the credit card you are considering. Lenders are notorious for giving pages and pages of paperwork- all in very small print. But it's up to you to actually read the terms of your agreement before signing. If there's something you don't understand, now is the time to ask questions. Differences in fees, rates and other terms can make a big difference in the cost of your credit card.

How you handle your finances can make a difference in which credit card to consider. For example, if you expect to pay off your entire balance each month, then a card with a higher APR but fewer overall costs may be the smart choice. If you want to transfer a balance to the new card, then look for one that offers a low interest rate on balance transfers. If you know you will be carrying a balance from month to month, you should consider a credit card with the lowest interest rate possible.

The Interest Rate

When you are comparing different credit cards, be sure to check the interest rate that you're being offered. Then compare the following:
  • The Penalty Rate - Know if there is one and if there is, when it is imposed. Many credit card companies will hike your interest rate if you have one late payment or miss a payment altogether.
  • The Standard Annual Percentage Rate (APR) - This is the rate you are charged for Balance Transfers, Purchases, Direct Deposit and Check Cash Advances, and Bank Cash Advances.
  • The Introductory Rate - Many lenders offer a lower introductory rate to new customers. If you get one, find out how long it lasts and what the rate will be once the introductory period expires.
  • Variable or non-Variable - Find out if your interest rate will be fixed (non-variable) or fluctuate (variable). Variable rates are usually tied to the U.S. Prime Rate.
  • Penalties and Fees - Is there an annual/monthly maintenance fee? Will you be charged transaction fees, late payment fees, or foreign transaction fees?
  • The Grace Period - This is the amount of days you have to pay off purchases without being charged interest. To qualify for a grace period, you must pay in full every month.
  • The Credit Limit - If you are a new credit card holder, it's probably smart to start with a lower credit limit. This allows you to become familiar with using a credit card for purchases and gives you the ability to form responsible credit card habits. Be wary of no-limit credit cards. These can have a negative effect on your credit score.

Rewards and Benefits

Many credit cards come with similar fees and rates. Sometimes the benefits and rewards of a specific card can make it the right choice for you.

If a card offers a low introductory balance transfer rate or a great frequent flier miles program, make sure you review and understand the terms and conditions of these offerings. Are there any restrictions or special terms? Are there blackout dates when you are not allowed to redeem your points for airline tickets? What is the process to access your benefits and rewards?

If customer service is an important factor in your decision, look for credit card companies which get superior customer reviews. Convenient and accessible customer service can make a real difference, especially when traveling. If you frequently travel outside of the U.S., ask if the credit card company offers toll-free numbers to speak with service representatives, if needed. Make note of any charges the credit card company makes for international purchases, foreign transaction fees, or any additional fees for international ATM withdrawals.

Remember, too, that loyalty only goes so far. If you have been using a certain credit card for several years, it doesn't mean that you're getting the best deal. Review your terms and conditions and see how they compare to other cards in the market. The bottom line is saving money- so see how your current card stacks up to the competition.