Too many consumers sign up select a credit card offer by looking only
at the credit limit and don’t give a second thought to whether they are
getting the most out of their cards. There are a number of items you
can do with minimal effort to significantly improve your financial
situation when it comes to credit cards.
Here are the top five things we suggest you look for when selecting a credit card:
1. Look Out for Two-Cycle Billing
A little known trick many credit card companies practice is something
referred to as two-cycle billing. With the standard one cycle billing,
the interest you pay is based on your average balance for the month.
Not so with two-cycle billing, where the interest you pay is based on
your average balance for this month and the previous month. This makes
it more difficult to get out of credit card debt because when you’re
working towards paying off your card.
The interest you pay makes up a higher percentage of your balance
because the calculation includes the higher balance you had the month
before. Whether the issuer practices two-cycle billing is not something
you will find in any of the promotions so it’s important to look for
this in the terms and conditions before signing up.
2. Use That Price Protection Plan
Many credit cards offer added perks like road side assistance and
extended warranties that rarely get used. One of these common perks is
something referred to as price protection. With this the credit card
issuers effectively offer you a 30, 60 or 90 day price match guarantee
on anything you purchase with your credit card. This comes in handy
with purchases like electronics that are known to have significant price
drops within a short period of time. Find a card with this perk and
use it!
3. Are Rewards Cards Really Rewarding?
Earning airline miles or cash back may sound like a great deal, but
the reality can be quite different. Although many cards offer great
deals like 5% cash back, this is often an intro offer and ultimately
you’ll only get the same 1% cash back or equivalent rewards that most
cards offer. If it causes you to spend more on you’re credit card it’s
immediately not worth it.
However there is another factor many don’t consider. The interest
rate on these credit cards in generally about 5-7% higher than their
non-rewards equivalent. Unless you are certain that you will never
carry a balance on the card, a rewards card is probably not worthwhile.
4. Transfer Your Balance
You may have heard when taking out a 30 year mortgage that the first
15 years of payments will only knock about 15% off the principal
borrowed. The other 85% is paid in the final 15 years. This is because
in the beginning nearly all of your payment is going towards interest
and only a small sliver goes to paying down the principal. As you get
it paid off it creates a snowball effect, which results in larger
portions of the payment being applied towards the principal each month.
The same is true for paying off credit card debt.
If you are serious about paying off your credit card debt a balance
transfer credit card is one of the best options available. In general
you should go with the balance transfer card that offers the longest 0%
intro apr period. The long term rate is less important in this case.
The reason is the 12-15 months you have of paying 0% interest allows
you to get a major jump on paying off the principal, creating the
snowball effect. If you still have a balance at the end of the intro
period you can look at refinancing again. Either way you’re going to
come out ahead.
5. Shop Around
Would you sign up for any mortgage or car loan offer you receive in
the mail because it said you were pre-approved? Then why would you sign
up for a credit card this way? Choosing a credit card is a major
financial decision. Rates and terms of credit cards vary greatly and
you should always shop around before choosing a card. It doesn’t take
long and there are dozens of websites that offer easy side by side
comparisons.
Jw Corbett is the CIO of Credit Web which offers Student Credit Cards as well as offering an in-depth supply of credit related information.
0 Comments: