If you sign up for our credit card now (the pitch in the mail states), you can enjoy a zero percent introductory interest rate, a stratospheric spending limit, no annual fee, 10,000 bonus airline miles and even cash back.
Sound too good to be true? Well, maybe it is.
First of all, accepting a pitch for credit on a whim probably isn’t the best way to manage your finances.
Shopping around for a credit card can save you money on interest and fees. It will also land you a card that matches your everyday and long-term needs.
“A customer’s financial lifestyle – how they use credit cards – should determine what card they choose,” says Ben Woolsey, senior writer for creditcards.com, a free online credit card search and comparison service. “A lot of them have bells and whistles, but those perks don’t work for everyone.”
Before you sign on the dotted line, here are some things you should know.
Options abound
Different credit card companies pitch themselves to different customers.
Some have low annual percentage rates but charge for cash advances and make you pay an annual fee. Others offer points or rewards for purchases but carry variable rates and have short grace periods.
When looking for a credit card, think about how you plan to use it, advises David Robertson, publisher of The Nilson Report, a consumer payment systems publication.
“If you pay in full every month, then you can use only one card, maybe have one as a back-up,” he says. “People with revolving credit may need a couple cards to reduce, spread out their balances.”
If you expect to always pay your monthly bill in full, consider a card that has no annual fee and offers a longer grace period.
If you sometimes carry over a monthly balance, look for a card that carries a lower interest rate.
And if you expect to use your card to get cash advances, you’ll want to look for a card that carries a low APR and has lower fees for cash advances. Some cards charge a higher APR for cash advances than for purchases.
“There are different choices that a consumer will need to make on what meets their lifestyle,” says Seth Eisen, spokesman for Visa USA. “It’s a matter of sitting down and thinking about what makes sense for your life.”
Credit card companies are going to advertise with their very best rate, but that doesn’t mean you’ll qualify.
“It makes them look good,” says Woolsey. “Once they get your attention, get you in, they will assign an interest rate to you.”
Rates, perks vary
When you apply for a card, be prepared to have your credit checked. Your credit history will help decide what interest rate and perks you receive.
If you don’t like what they tell you, or if you don’t qualify for the card, it’s probably worth going elsewhere.
“Really low interest rates, features, rewards are commodities right now,” Woolsey says. “If you don’t like what you hear, go somewhere else.”
Look for rewards
One thing that may persuade you to select one card over another is the perks and benefits associated with being a cardholder.
“Generally, you should be getting something extra, because it’s available,” Woolsey says. “A lot of people are wary of rewards. It’s like free money.”
By 2009, the vast majority of consumer credit cards in circulation – 85 percent – will offer some sort of reward for its usage, predicts market research publisher Packaged Facts.
While some customers simply want a card for shopping, others focus on picking up airline miles, points toward purchases, hotel credits – even cash back.
“Offering rewards have become, and will continue to become, a necessity with credit cards,” says David Morris, author of the Packaged Facts study. “It can be overwhelming to the consumer. There’s so many to chose from.”
You CAN have too many
With all those choices – 886.2 million credit and debit cards were issued in the U.S. last year – it would be surprising if some people didn’t have too many credit cards.
“I’ve seen between five and six cards per adult in the country,” Morris says. “Wallets are saturated with credit.”
Credit bureaus say the more cards you have, the bigger risk you are to go into debt and damage your credit rating.
It’s a good idea to only keep cards that you’ll actually use.
No matter how many credit cards you have, try to pay them off each month – or at least pay more than the minimum payment.
Also, always read the fine print – in the application, in your monthly statement or in any other disclosures you receive in the mail. Issuers must inform you about any new terms or changes to your cardholder agreement.
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