Choosing a Credit Card

September 20th, 2011, by

Q: It’s my first time applying for a credit card. How do I know which one is the best one for me?

A: First, you should know there are a lot of new laws to protect credit card users. So, before you get a card, I want you to know what protections you have.

Go to the “Credit Card” section of the Federal Reserve’s Web site to get some basic information about your rights. Armed with this information, you can then figure out which card best suits your needs.

Most importantly, you need to understand the terms and fees of any credit card offer. For example, your credit card can have several different interest rates depending on how you use the card. For credit cards, the interest rates are stated as a yearly rate, called the “annual percentage rate” or APR. You can have different APRs—one for cash advances and another for new purchases. Or, your card may have a lower APR during an introductory period and then the rate may jump after that period ends. Look at the penalty APR, which kicks in if, for example, you pay your bill late.

Obviously, you want to find a credit card with the lowest APR; but, with most cards, if you pay your bill in full every month, you won’t pay any interest. Credit card issuers may also offer a combination of fixed and variable rates.

Many credit cards have fees. Because of recent changes in credit card protections for consumers, many more card issuers are charging annual fees. You may particularly find annual fees on a credit card that offers rewards, such as free airline miles. However, take careful note as to how much you have purchased on the card to get those free miles.

Use the Federal Reserve’s Consumer Credit Card Agreements Search to get an idea of the types of credit card terms and conditions that are out there. This tool can help you compare various offers.


Last modified: September 20, 2011 at 1:45 am