Tuesday, January 13, 2009

Credit Basics: Choosing and Using Credit Cards

One of the most powerful financial tools that the modern technology has ever-produced is the credit card. And there is definitely no denying that a credit card is an extremely and overwhelmingly useful and powerful financial tool only if it used properly.

This small and thin 'plastic' is now responsible for the seemingly endless possibilities of getting things done in just one swipe. Aside from the fact that most people-especially in the US-find these plastic cards more convenient and safe to carry around compared to cold, hard cash, many of them also appreciates the consumer protection provided by the Federal Law.

But, with so companies coming out with many kinds of credit cards, it is no wonder that many people get confused and overwhelmed by the "convenience" each and every one of them offers. Since people have very diverse and different credit needs, they must be very careful in choosing the right credit card for them so that they could avoid the portent of credit traps.

While it is true that there is no single credit card that will fit everyone's need, it doesn't mean that consumers should just take in what these creditors offer. Before your credit card lead you to a path wherein you owe more than you can afford repay, or before it damages your credit and would create trouble by careless usage, here are some vital information that can guide you to choose the right credit card for your need.


The most basic tip in choosing and using any credit card is to identify first your credit need. You must ask yourself why do you need it and when do you need to use it. If education, health, home improvement, and business are some of your reasons, then you should start looking for a credit card. But if it is for purely convenience in purchasing the things you need, think twice and hard first. Before getting one, you must have a specific target where you can use your credit card wisely.

After defining your credit need, you must conduct a credit card research so you can review and compare the credit cards available in the market. This may seem very general and vague but this is the most basic thing one should do if you plan to apply for a credit card. You may research first what are the available credit cards out there. As you may know, there are actually hundreds of banks and other finance agencies that are offering credit cards and each of them has a lot to say about their product.

By doing research through online and offline resources, you can learn more about credit card offers and ratings. After doing an extensive research on all of the cards, you may now review what they offer and start the "elimination process." By reviewing all these credit cars, you can create some sort of chart for you to see side by side and compare what important features each credit card offers.

You must choose a credit card that can easily establish and strengthen contact with credit unions. Once you apply for a credit card, you become a creditor. It will be beneficial for you if you belong to a credit union since these are non-profitable organizations. They also offer a lower overhead that can offer you numerous advantages like lower interest charges.

Try looking for a credit card with a low Annual Percentage Rate (APR) or the measure of the cost of credit expressed as a yearly interest rate. In choosing the right credit card, it is a must that you check out the APR because this is the amount charged to you on monthly outstanding balances. Bear in mind that the higher the rate, the higher the chances you will pay relatively high interest charges.

Also consider interest rates and find out what if a fixed-rate or adjustable rate credit card would suit you best. Many people-especially those who pay off their balance monthly or those who only use cards for small purchases-opt to use cared that has a fixed rate. Even if the rate is a point or two higher than the usual, it ensures that they can pay off their loan quickly without even noticing the difference.

Fees can be considered one of the bloodlines of most credit card companies. In addition to your research, you should never forget to do an extensive research on credit card fees, transaction fees, and other charges. Since numerous companies are infamous for charging their clients fees that add up quickly, you should make sure to check the fees section of the credit card disclosure section before fully indulging into it. This is also one way of knowing the recognized fees collected like annual fees and cash advance fees.

Also consider length of Grace Period or the amount of time between the date of a purchase and the date interest starts being charged on that purchase. So you would know how much time you can buy before you make your payment.

You must also consider taking credit cards that offer other benefits and make sure to understand all necessary and additional terminologies in the contract in your credit card application and acquisition. Lastly, take into consideration your credit limit for your ultimate credit experience.

To apply online for a major credit card, visit Credit Card Info Guide

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