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Question: How can I save money choosing a credit card?
Answer: It seems like every week I find a new credit card offer in my mail box.
The variety of credit card terms and choices can seem overwhelming.
To get the best deal when you select a card, consider and compare all the terms,
including the following:
- The annual percentage rate (APR) is the cost of credit as a yearly rate.
- The free or grace period allows you to avoid any finance charge if you pay
your balance in full before the due date. If there is no free period, you pay
finance charges from the date of the transaction, even if you pay your entire
balance when you receive your bill.
- Fees and charges can include an annual fee, a fee for cash advances, late
charges, or a charge for exceeding your credit limit. These fees are often
substantial. Avoid them. If you pay bills in full each month, the size of the
annual fee or other fees are more important in choosing a card. If you carry a
balance, the APR and the way the balance is computed are key terms to consider.
- Get all terms and fees in writing, including whether a deposit is required.
- Apply directly to the card issuer. Don't give money to a company that offers
to get you a credit card for a fee. You may not get the card, and you may not
get your money back.
- Beware of "credit cards" that only allow you to buy from their own catalogs.
Often goods from those catalogs are more costly.
- Beware of companies that promise instant credit or guarantee you a credit
card "even if you have bad credit or no credit history." No one can guarantee
you credit in advance.
- Be cautious about secured credit cards that require you to set aside money in
a separate bank account in an amount equal to the line of credit offered on the
card. This is to guarantee that you will pay the credit card debt. Some
advertise that secured cards can repair a bad credit record. You should know
that no matter how well you handle this account, your payment history on your
past debts will be taken into consideration when you apply to other lenders for
credit or apply for employment or housing.
- Keep good records. In one place, keep all credit agreements and billing
information, including statements and check stubs for the payments you have
made.
To accelerate your savings, consider reducing credit card use and paying balances
in full.
Source: 1998-99 Consumer's Resource Handbook
For more information, contact your local
Colorado State University Extension office.
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