How to Evaluate Credit Card Offers

In 2011, credit card issuers stepped up their game in soliciting new credit card holders. With fierce competition for customers, credit card companies have rolled out numerous enticing offers and have loosened up their requirements for those seeking a new credit card. If you're in the market for a credit card and you have decent credit, then you have plenty of choices. Choose wisely, and you could reap benefits while improving your credit score. Here are some things to consider if you're thinking about applying for a credit card.

Annual Fees

Two of the most important features of a credit card are its annual fees and the interest rates charged. Today, there are plenty of cards that do not charge annual fees. Some credit card companies charge fairly steep annual fees because they offer expensive perks, like access to airline club lounges in airports. Others charge high fees in an effort to give their cards an air of prestige. If you're not interested in expensive perks, choose a card with no annual fee.

Interest Rates

Interest rates on credit cards average between 16% and 17%. However, credit cards exist with interest rates as low as 9% or as high as 30%. The better your credit history, the lower the interest rate you will qualify for. Be aware that the interest rates advertised in a credit card advertisement is not necessarily the interest rate you personally will pay. Advertised rates are the ones that the average cardholder can expect, but if you have a sketchy credit history, your rate will almost certainly be higher.

Customers who Carry a Balance

If you're the type of credit card user who carries a balance from one month to the next, choose the card with the lowest interest rate. You may not think there's much difference between an interest rate of 12% and 15%, but over the life of the line of credit, it can save or cost hundreds of dollars.

Customers who Pay in Full Every Month

If you never carry a balance, choose a card with no annual fee and with the perks you're most likely to use. Cash back credit cards are great for customers who pay in full each month because they reap the cash back rewards without offsetting them by paying interest charges.

What to Look Out For

A law passed in 2009 forced credit card issuers to be more up-front about their charges and about how many months or years it takes to pay balances completely if customers only pay the minimum required payments. You should still read the terms and conditions carefully to avoid any hidden surprise fees or charges. Specifically, watch for:

• Monthly fees in addition to annual fees
• Fees for paying by phone
• Lack of "grace periods," allowing interest to accrue from the moment of purchase
• Fees for increasing your credit limit

Unfortunately there's no way to find out if you're subject to these sneaky fees and charges except by reading the terms and conditions, so take the time necessary read them in order to protect yourself.

Sources:

http://credit.about.com/od/creditcardbasics/bb/choosecard.htm
http://www.federalreserve.gov/creditcard/
http://www.getrichslowly.org/blog/2008/09/09/credit-card-basics-how-to-choose-a-credit-card/