CREDIT
CARDS:
How To Choose -- How To Use
Examine
The Card's Terms
Annual Percentage
Rates
Variable Rates
Annual Fees
Use It
Wisely
EXAMINE THE CARD'S TERMS
To choose a credit card wisely, you must first review and understand the terms and features of the various cards. This can add up to very respectable savings over a period of time. In addition, you should also know how to use your cards wisely to keep your costs to a minimum. The Financial Guide explains how to achieve these goals.
Chances are you have received offers in the mail asking if you would like to open credit card accounts. Frequently, these offers say that you have been "pre-approved" for the card, often with a very attractive interest rate (usually, a short-term "low-ball" rate) and with a line of credit purportedly set aside for your use (although few people ultimately qualify for the credit line in the promotional literature). Typically, these offers urge you to accept quickly, "before the offer expires." However, before accepting a credit card offer, understand the card's credit terms and compare costs of similar cards to get the terms and features you want.
Making an informed decision about a credit card is largely a matter of finding out what the actual cost of credit is under that card. Credit cards involve not only a ''finance charge" and charge for the convenience of borrowing, but usually other, less obvious charges as well.
Which card is best for you may depend on how you plan to use it. If you plan to pay bills in full each month, the size of the annual fee or other fees, and not the periodic and annual percentage rate, may be more important. If you expect to use credit cards to pay for purchases over time, the APR and the balance computation method are important terms to consider. In either case, keep in mind that your costs will also be affected by the grace period.
Annual Percentage Rate
The "annual percentage rate," or APR, is disclosed to you when you apply for a card, again when you open the account, and on each bill you receive. It is a measure of the cost of credit, expressed as a yearly rate.
The card issuer also must disclose the "periodic rate," the rate the card issuer applies to your outstanding account balance to figure the finance charge for each billing period.
Variable Rates
Some credit card plans allow the card issuer to change the annual percentage rate on your account when interest rates or other economic indicators (called indexes) change. Because the rate change is linked to the performance of the index, which may rise or fall, these plans are commonly called "variable rate" plans. Rate changes raise or lower the amount of the finance charge you pay on your account. If the credit card you are considering has a variable rate feature, the card issuer must tell you that the rate may vary and how the rate is determined, including which index is used and what additional amount (the "margin") is added to the index to determine your new rate. You also must be told how much and how often your rate may change.
Annual Fees
Most credit card issuers charge annual membership or other participation fees. These fees range from $25 to $50 for most cards and from $75 on up for premium "gold" or "platinum" cards (with the American Express Platinum costing $300).
Transaction Fees and Other Charges
A credit card also may involve other types of costs. For example, some card issuers charge a fee when you use the card to obtain a cash advance, when you fail to make a payment on time, or when you go over your credit limit. Some charge a flat monthly fee whether or not you use the card.
USE IT WISELY
Here are some suggestions for the use of credit cards:
1. Pay bills promptly to keep finance charges as low as possible.
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TIP:Keep copies of sales slips and promptly compare charges when your bills arrive. |
2. Keep a list of your credit card account numbers and the telephone numbers of each card issuer in a safe place in case your cards are lost or stolen.
3. Protect your credit cards and account numbers to prevent unauthorized use.
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TIP:Draw a line through blank spaces above the total when you sign receipts. Rip up or retain carbons. |
4. Deal only with reliable firms. In doubt? Check with your local consumer protection agency or the Better Business Bureau (BBB) nearest to where the business is located. Study the advertising offer carefully. Ask the company about its warranty, refund and exchange policies. If you cannot get the answers to your questions, or there are any doubtful claims, do not buy.
5. Never Send Cash. Never give out your credit, debit charge card, or bank account number unless you have checked out the company or have done business with them before.
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TIP:Try to pay by charge or credit card, so that you have record in the event of a dispute with the merchant. |
Select
from a variety of student credit cards and apply online via secure server.
