Things You'll Need:
- Calculator
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Step 1
Compare the "go-to" rates for cards that offer low-interest or zero-interest introductory rates. Frequently, a card will promise low or no interest for a period of 6 to 12 months, then introduce a regular rate that may be exorbitant. Moreover, the go-to rate might be variable and tied to an index such as the prime rate, and thus subject to change without notice.
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Step 2
Look at the annual percentage rate (APR) on a fixed-rate card, and figure out how much money you'd spend in interest each year if the account balance were at its maximum. Obviously, cards that offer lower APRs make better choices, but the APR doesn't always tell the whole story--ask anyone who has a credit card with an annual fee.
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Step 3
Compare the annual fees of the various credit cards you're considering, and factor in fees when you compute how much you'd spend in a year if the account were maxed. For example, a card with a 10 percent interest rate, a $1,000 credit limit and a $150 annual fee would cost you $1,250 if you carried the maximum balance for a year. However, a card with no annual fee and a 15 percent interest rate would cost you only $1,150 over the same period of time.
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Step 4
Find out if different interest rates apply to different types of transactions. Often, credit card companies advertise a certain APR, but that APR applies to purchases only, and balance transfers and cash advances are subject to different (usually much higher) rates.
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Step 5
Learn everything there is to know about fees and charges that are levied on the account under certain conditions and for certain types of transactions. For example, balance transfer fees of as much as 4 percent may apply to balances brought onto a card from another credit card. Also, factor in late payment fees, over-balance fees, fees charged for cash advances and any other monthly fees the company may levy.
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Step 6
Plan to decline if the credit card company offers you any additional features, such as payment protection, if you'll have to pay for them. You'll almost never use these ancillary services if you're careful and responsible with your credit card spending, and they'll just drive your bottom line up if you purchase them.
