November 8, 2019 • 3 mins
Like dandelions in a spring lawn, credit card offers pop up everywhere — stuffing your mailbox, flashing on the internet and falling out of magazines. They all sound so attractive: "0% APR until next year!" "No fee if you transfer a balance now!" "Low fixed rate!" You’re thinking of applying for a card, but how do you decide which offer is best for you?
First, you need to understand what a credit card is and how it’s different from a debit card. Next, you can evaluate the offers and decide which card is right for you.
If you intend to pay off the balance each month and won't incur any finance charges, obtaining a low interest rate is less important than finding a card with no annual fee, minimal transaction fees, and a long grace period. If you'll carry a balance from month to month, you'll want a low interest rate and a balance calculation method that minimizes your finance charges."
Once you've answered the questions above to see how this card will fit (or won’t fit) into your financial life, you need to think about how you'll use the card. If you intend to pay off the balance each month and won't incur any finance charges, obtaining a low interest rate is less important than finding a card with no annual fee, minimal transaction fees, and a long grace period. If you'll carry a balance from month to month, you'll want a low interest rate and a balance calculation method that minimizes your finance charges.
Perhaps you're not currently using your credit card, but you want to minimize the finance charge on your existing balance. One way to do so is to transfer your balance periodically to a new card with a low introductory "teaser" rate of interest. If you choose to "surf" in this fashion, be cautious. Watch out for:
When you transfer a balance from an existing card to a new one, it's a good idea to close the account you're leaving. By doing so, you won't be tempted to use the card again (at a higher rate of interest once the introductory offer period has expired), and you'll minimize the potential for fraudulent use or identity theft. What's more, if you don't close such accounts and later try to transfer your balance again, a new card issuer might turn down your application, afraid you'll incur too much debt by running up new balances on dormant, but open, credit card accounts.
Source: Broadridge Financial Solutions, accessed October 22, 2019.
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