Credit Card Guide

Now that I am a writer of product reviews at Viewpoints.com, I have the opportunity to pass along some of the knowledge that I acquired throughout my career.  With this knowledge, information gathered from Viewpoints credit card reviews and from other credible sources, this guide will enable you to make a more informed decision about what credit card is most beneficial to you.

I'm sure that most of you have received many offers in the mail from credit card companies and banks offering teaser rates, points, miles, and countless other privileges to get you to apply for their card.  You have been on a plane and asked to sign up for a mileage credit card or been to a gas station and told you can earn points for purchased gas.  And, of course, we have all been approached at a retail store to get a credit card.

It can get overwhelming when you are seriously trying to make a decision of which one to choose.  Try not to get hooked into these offers until you read the fine print.  Most importantly, you need to assess what your purchasing and payback habits are.  Someone who pays off their credit card balances each month should be looking at different types of cards than those that carry a balance.  I am here to help with all kinds of credit card user.   

If you are on a tight budget and plan to carry a balance each month, you need to be most concerned about interest rates.

If you 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.

Credit Card Recommendations for those concerned with the interest rates:

Excellent Credit:

• Kiplinger.com, creditcards.com, and creditratings.com recommend the American Express Blue 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 the Citi Platinum Select Card which offers similar terms but without the rewards program.

Limited/Fair Credit

• Check out the Capital One Platinum card or the Capital One Platinum for Students 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

• Do you have bad credit and don't think that you can get a credit card? Think again because there are options out there. 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.

• The Orchard Bank Classic MasterCard 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 anywhere from $0-$79.

If you pay your balance off each month-pick a reward credit card:

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.  BUT 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 Leisure Rewards 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.  JCPenney and Macy's are currently offering 10% off of your first online purchase if you apply for a credit card.  Other perks are outlined more specifically at the following link on Macy's website. Be sure to check out the annual fees while you are there.

Gas Credit Cards

Today's high gas prices are making gas-rebate credit cards increasingly more popular.  Gas rebate cards usually pay 3% to 5% cash back rewards on gas, depending on the bank that issues the card.  Most gas cards require you to accumulate at least $25 in credits before they allow you to request a check for your rebate. The Exxon Mobil MasterCard offers 3% rebates on purchases at Exxon and Mobile stations and 1% on purchases everywhere else. There is no annual fee and you receive extra cards for all drivers in your family. 

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.

Credit Card Recommendations for who want the benefits of  "rewards":

Here is a sampling of credit cards that people rave about.

Best Credit Cards with Point Rewards

Citi Diamond Preferred Rewards Card                                                                                                                                          

The Citi Diamond card allows the cardholder to earn 5 points for every $1 spent on purchases at supermarkets, drugstores, and gas stations for 12 months and then 1 point for every $1 on all other purchases.  The cardholder can earn 6,000 points after their first purchase that is redeemable for a $50 gift card.  Another great perk is that there is no annual fee and  the rewards program is free!  If balances are transferred, a 0% interest rate will apply on those balances for 12 months. 

What Cardholders say about their Citi Credit Card:

• "Compared to Chase & Capital One, I much prefer the Citi experience. Most likely a customer for life."
• "I can say that Citibank will go to bat for you if you have a problem with another company."
• "They appreciate loyalty, waived fees when appropriate, alerted to potential fraud."

 USAA Platinum MasterCard

The USAA MasterCard allows you to earn points toward cash, travel, and merchandise.  The rate is variable and is as low as 7.75% on purchases and cash advances.  One point is earned for every dollar in purchases with no cap or expiration date on the points.  There is also no annual or redemption fee.    

What Cardholders Say about their USAA MasterCard:

• "This is the best credit card I have ever owned!"
• "If you have an issue, they are open to discuss it and really will help."
• "I have several credit cards and the one with the least amount of hassle is the USAA MasterCard."

Retail Programs

Paypal MasterCard Plus        

The Paypal MasterCard is a great reward card for those that are online/eBay junkies. It offers you the ability to earn 1 point for every dollar you spend.  The points then can be redeemed for:

            * 1,000 points - Free shipping up to $7 on a PayPal purchase

            * 2,500 points - $25 Reward Voucher

            * 9,500 points - $100 Reward Voucher

The vouchers can be used in a number of paypal related ways.  You can use them toward the card balance, on purchases at online stores that use paypal (you can find a list on paypal.com) or for paying for items and purchases on online auction giant EBay.  

What Cardholders Say about their Paypal MasterCard:

• " I have had an account for years. Never any problems. I would suggest this card to everyone."
• " You can also fund your paypal acct thru your own credit card as the company is easy to use online"
  
  Wondering who PayPal is? Check out these paypal reviews.

Best Store Credit Cards (this is one example, there are tons more!)

Kohl's Credit Card           

Although the Kohl's credit card is traditional in that it can only be used at Kohl's Department stores, the rewards it offers make it worth applying for.  Upon applying and credit approval, you receive a 20% discount off your first credit card purchase.  You also receive a free gift certificate for a future purchase.  If a cardholder spends over $600 dollars, they get the "Most Valued" customer status that entitles them to even more rewards and discounts.  People rave about the advantages of using this card during major yearly events such as holidays before school begins and the change of seasons.

What Cardholders Say about their Kohls Credit Card:

• "My family and I shop all the time at Kohl's anyway, so it makes sense to convert these shopping excursions into money saving events. "
• " As long as I pay at least 1/3 of my bill by the next billing date, I have no finance charge. So I'm paying same as cash. Nice option."
• " On one shopping experience I spent over $100 and with my discounts, coupons etc. my bill was about $20.00."

Best Gas Credit Cards

Mobil/Gulf Gasoline MasterCard
Everyone needs gas and with gas prices the way they are, gas reward credit cards are becoming much more popular.  Most gas cards offer similar rewards but you still may want to shop around for the best deal.  The Mobil/Gulf Gasoline MasterCard card earns you 1% back on all purchases and 5% back on gas purchases.  Though the APR is kind of high, if you pay off your bill each month and use this card for general use, you can get some great savings on gas.

What Cardholders Say about their Mobil Credit Card:

• "I have had this card for 2 years, and have earned over $50 back in rebates."
• "I selected the Gulf gas card because I do not travel frequently enough to use a frequent flyer card. The Gulf card was the best combination of rebate amount (5%/1%) and ease of use"
• "The Best rebate card out there: $800+ in 4 years"

Discover Open Road Card      

With the Discover Open Road credit card, you can get a 5% rebate at any gas station (up to $1200.00 in purchases), a 5% rebate on various automobile maintenance procedures (up to $1200.00 in procedures a year), and rebates up to 1% on non-automobile related purchases dependent on your yearly purchase total. In addition, select purchases will get double the rebate if they're purchased from a Discover Card affiliate. The overlimit fees are variable from $15.00 to $35.00 and late fees are variable from $19.00 to $39.00. These fees are based on the total overall balance on the card at the time a user makes a late payment or goes over his or her available credit line.

What Cardholders Say about their Discover Open Road Card:

• "We highly recommend it to save money at the pump."
• "This is the only credit card that allows you to earn 5% rebates on auto maintenance expenses"
• "Simply put, you'll automatically save 5% on your gas purchases."

Best Cash Back Credit Cards

Discover Card

Discover is one of the most widely known cash back rewards cards on the  market. While it may not be accepted everywhere, the span is large.  It allows up to 1% cash back on all purchases and also offers an annual 5% bonus cash back throughout the year on specific purchases.  The rewards earned can be redeemed in either the form of a gift certificate, a check, or used towards your account balance. People seem to love the customer service and say that the security on it is among the best. Calls from Discover are not unusual if your spending habits change.

What Cardholders Say about their Discover Card:

• "Another pro is their website. I find it to be the most user friendly."
• "If you change your spending pattern or a charge looks odd, you will get an immediate call from Discover security verifying the charge."
• "They always seem to answer the phone quickly, they are courteous."
• "Cashing in your reward dollars for gift cards is hassle-free and dependable."
• "We've used them for 20+ years. The wide variety of cash back bonus offers are a definite plus."

Chase - Professional MasterCard

The Chase credit card is not only great for the "professional" but for the average user as well.  It offers 3% cash back at places like gas stations, restaurants, hardware and home improvement stores, and office supply stores.  Anywhere else, it earns you 1% cash back on purchases.  Either way, you get rewarded regardless of what you purchase.  Most cardholders note that the people that get the most out of this card are contractors, home improvement enthusiasts or those who have home businesses.

What Cardholders say about their Chase Mastercard:

• "As a contractor, I spend a lot of money in hardware and home improvement stores. I also buy a lot of gasoline for my work truck. That's why this is the perfect card for me"

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