Choosing A New Credit Card
Summary: So you have decided that you would like a new credit card, but how do you decide which one is best? That's a tough question, but evaluating all the available credit cards and finding the right deal...
So you have decided that you would like a new credit card, but how do you decide which one is best? That's a tough question, but evaluating all the available credit cards and finding the right deal is not actually as hard as it may first seem.
Each individual will have different expectations and require different features from their credit card, but there are a few key areas to consider before making your decision.
Firstly, it is important to determine your primary reason for wanting a new credit card. If you currently have a credit card you can identify features that are missing, or fees that you believe are excessive, and then find a new credit card that removes this problem. Here are some areas for you to consider.
If you currently have a credit card debt you may be able to use a balance transfer credit card offer to buy yourself a short period of time to repay your debt at a lower interest rate. Many balance transfer deals include 0% or 1% p.a. interest rates for the first six to twelve months. Be aware that once the balance transfer period ends the interest rate will generally increase to the standard rate which can be as high as 18 - 21% p.a. on some cards.
There are a variety of credit card fees charged by financial institutions, such as:
- Annual fees
- Transaction fees
- Reward program fees
- Late payment fees
- Overdrawn credit limit fees
Low annual fee credit cards are available and are often advantageous for those who only spend a small to moderate amount on their credit card each month. Be sure to read through the fee structure of your chosen credit card to ensure you understand the situations in which you will be charged.
One of the easiest ways to evaluate a credit card is to compare the comparison interest rate, which indicates the overall rate once interest and fees are combined. The higher the interest rate, the more you will have to repay to the bank on top of your purchase debt. Some credit cards will offer an introductory interest rate for the first few months, so be sure to check the standard interest rate for each credit card.
Perhaps the most misunderstood aspect of credit card offerings is the associated rewards programs that some cards include. Normally you will pay an additional fee each year to have access to the rewards program, and in some cases these fees can be quite high. The general rule of thumb is that those who spend a lot of money (i.e. $5000+ per month) can take full advantage of credit card reward programs. The trouble for low spenders is that often the annual fee outweighs the total reward for the year - meaning you are simply paying more money to the bank. There are also a range of bonus point offers and reward partner programs so it is important to consider your individual circumstances.
Tips and hints
- Check the credit card comparison interest rate.
- Read through the list of applicable fees for each card.
- Low spenders are often well suited to low fee cards.
- High spenders can gain advantages from rewards programs.
- Use our free credit card comparison service to see all current credit cards and deals.
- Check out this month's top credit card deals.
Image Credit: WingedWolf, Creative Commons
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