Credit Card Help - Find the Best Credit Card Now
THE IMPORTANCE OF INTEREST RATES
If you are on a tight budget and plan to carry a balance each month, you should concentrate primarily on the credit card interest rate and if there are any annual or other fees.
Here is some basic information on credit card interest rates.
- Initial or "Teaser" Rates: Initial rates are those "teaser" rates that you typically see in mailings. They offer you a low percent interest rate on transferred balances or for a period of time. Some offer zero financing with no payments. These could be good options as long as you are aware of when that rate or terms expire and what they will be after. It is very important that you read all the fine print. There are some credit cards out there that if you accept the no interest, no payments offer and don't pay off the balance by the end of the term, your entire balance gets charged a whopping interest rate from the date of the initial balance.
- Variable Rates: A variable rate means that the APR (Annual Percentage Rate) fluctuates with the prime rate. (The rate at which banks borrow money from each other) The most common types of variable rate credit cards have a rate of prime plus a certain percentage. For example, prime plus 4.99%. According to the Wall Street Journal, the prime rate today is 5.25%. In this case, the rate on this credit card would be 10.24%. The prime rate will move up or down with changes by the Federal Reserve Board.
- Fixed Rates: If you choose a credit card that has a fixed rate of interest then that rate is fixed for a period of time. The bank can change the account terms, including the periodic rate, at any time as long as it notifies you at least 15 days prior to the effective date of a change.
RECOMMENDATIONS FOR THOSE CONCERNED WITH INTEREST RATES
Excellent Credit
- Kiplinger.com, creditcards.com, and creditratings.com recommend an American Express card as a good option if you are have excellent credit and are looking for a 0% initial rate, a low balance transfer rate and depending on your credit history, a very reasonable rate after the initial rate expires. This card has no annual fee and even has a Membership Rewards Express program.
Good Credit
- For those with good credit, they recommend a Citi card which offers similar terms but without the rewards program.
Limited/Fair Credit
- Check out a Capital One card. They are good options because the interest rates aren't sky high like most others in this category but you will be paying an annual fee.
Bad Credit
- There are two types of credit cards for people with bad credit. The first is the unsecured credit card that functions like a regular credit card, except the credit line will be lower and the fees higher. The other option is a secured credit card. Secured credit cards use money that you deposit into a bank account as an assurance of payment. Although these will not have the best of terms or the highest of limits, as long as you pay on time, your credit limit and the terms will steadily improve over time.
- An Orchard Bank card offers you the opportunity to establish better credit and with their pre-screening credit application, you will be directed to the Platinum, Gold, Classic or Secured credit card. It is possible to get an annual percentage rate as low as 14.90% but the annual fee varies.
GET A REWARDS CREDIT CARD IF...
If you are someone who typically pays off their credit card each month, then you should go for the credit card that has the best rewards that fit your lifestyle because rewards cards usually charge higher interest rates than other credit cards. If you are paying that balance off each month, the interest rate isn't all that important but you do deserve to get some rewards for doing so. BE PREPARED TO PAY AN ANNUAL FEE to get some of these credit card benefits.
There are many different types of rewards credit cards to choose from.
Credit Card Points Programs
Specific terms and conditions vary between each credit card issuer. The procedure of earning points is about the same. For every dollar a cardholder charges, he earns a point. These points add up and when they reach a certain amount, the credit card holder can choose rewards from a catalog. Usually rewards start at about 2,000 points and can include anything from movie tickets to pilot lessons. For example, check out The Chase Card.
Store Credit Cards
Many retail stores are offering discounts or free merchandise if you apply for their credit card. Department store credit cards can be a good way to establish credit because it is easier to get approved, as the credit limits are lower. Beware though because the interest rates are almost always higher than any other type of credit card. Most times the perks don't outweigh the finance charges. Be sure to check out annual fees.
Gas Credit Cards
Gas rebate cards usually pay rewards on gas, depending on the bank that issues the card. Most gas cards require you to accumulate a certain number of dolalrs in credit before they allow you to request a check for your rebate.
Cash Back Credit Cards
Specific terms and conditions vary between each credit card issuer. The procedure of earning the cash rewards is about the same. In most cases, for every dollar a cardholder charges, he earns a point. The points are then converted to cash or money points. These cash points can be used to buy items but some require that these points get spent at a specific store while others are more flexible. The cash points can even be used to pay other bills using your credit card. Some cards have maximums as to the number of points a cardholder can earn. This article will give you more information on Cash Back credit cards.
Rewards Card Recommendations. Here is a sampling of credit cards that people rave about.
OTHER TYPES OF CREDIT CARDS
Didn't see any credit cards in this guide that you think fits your lifestyle? No need to worry! There are still many other credit card options to choose from.
Student Credit Cards (also see above-Limited/Fair Credit)
Student credit cards can help both high school and college students build their credit history. Obtaining a student credit card is becoming easier and it can help students build a good credit history that is often needed later for bigger purchases like a car or home. Be aware though, interest rates on such cards are often higher and students may spend well beyond their means and end up in debt that they can't pay off.
Credit Union Credit Cards
Credit Unions are not-for-profit cooperatives that are owned by the members and operated mostly by volunteer boards. For these reasons, credit unions can offer members lower interest rates on credit cards. Definitely a good option worth checking into!
Prepaid Credit Cards (also see above under Bad Credit)
As mentioned above, a prepaid or secured credit card is opened by depositing a certain amount of money into an account. You are then issued a prepaid credit card that can be used anywhere that a regular credit card could be. The good news is, is that you can only spend as much as you have on deposit and there are no bills or interest charges.
The bad news is that you do have to pay a fee to set an account up. The fee varies but is usually around $5 or $10 U.S. dollars. Each time you deposit more cash, you do have to pay an additional fee.
For people with bad credit, these prepaid cars allow them to reserve rental cars or hotel rooms just as if they had a regular credit card.
TIPS FOR ALL CREDIT CARD USERS
Regardless of what credit card type you choose or where you choose it from, here is some information to keep in mind:
Interest Rate
- If you are in good standing with your credit card company, you don't have to settle for high interest rates. This company wants and needs your business. Give the company a call and let them know that that you are not satisfied with your interest rate. They will review your payment history and will most likely lower your rate. Most times if you request to be transferred to a supervisor, you will get a better rate as long as you haven't abused this privilege in the past.
- If you have several accounts with the same institution, you may qualify for further discounts on your rate and have the annual fee waived if there is one.
Late Fees
- If you regularly pay your credit card bill on time but accidentally make one late payment and are charged a late fee, again by just making a phone call to the company asking, you can usually get this fee removed.
Too Many Credit Cards
- Some people sign up for credit cards on a whim because of free gifts, or think that they need to have them in case of an emergency. What ends up happening is that they have a wallet full credit cards and a risky looking credit report. Even if these credit cards are never used, their credit report shows that they have all these open lines of credit that could potentially be used. When applying for a mortgage or a car loan, they could easily be turned down for having too much credit available. While it is good to have a couple of major credit cards with low interest rates to build good credit and to have for emergencies, having too many credit cards is not a good thing. If you are one of these people and plan on applying for credit for a major purchase like a home, you may want to start cutting up those credit cards. Remember though that just cutting them up does not mean your account is closed. You must send a letter to the credit card provider and inform them to close your account. Often times, even by sending a letter, the account remains open therefore; it is a good idea to ask for a letter in response indicating that the card is indeed closed.
Average Credit Card Rates
- To check daily average rates for different types of credit cards go to Kiplinger.com.
Credit Card Cap (maximum rate that can be charged)
- Unfortunately only about half of all U.S. states cap credit card interest rates. Banks and credit card issuers in states that do not have caps, can charge any interest rate they want as long as the rate is disclosed in the cardholder agreement and the borrower agrees.
Being a good customer and staying informed always has advantages. It puts you in the driver's seat and gives you power over your finances.
SOURCES
consumerreports.org, bestcreditcardoffers.com, e-wisdom.com, cardratings.com, kiplinger.com, creditcardguide.com, creditcardassist.com, cardoffers.com, epinions.com, and viewpoints.com
