How to Evaluate Credit Card Terms

If you have a mailbox, chances are you find offers for one credit card or another on a weekly basis. Credit companies stand to make a profit if you choose their card. Knowing how to evaluate the terms offered by a credit card provider will save you money and allow you to pick the features you want.

Difficulty: Moderate

Instructions

1. Look for the card's Annual Percentage Rate (APR). Credit card companies must disclose their rates upfront. Most cards offer a lucrative initial rate that increases after a few months or in the event you make one or two late payments.

2. Bypass high annual fees. To participate in their card membership, providers charge a fee each year. Some cards charge only if you have an outstanding balance while others charge every year whether you use the card or not.

3. Compare transaction fees. If you plan to use the card for cash advances or to transfer balances from other cards, beware that transaction fees may result. Sometimes the provider charges a flat rate and other times you may pay a percentage of the total amount.

4. Read the fine print to discover the method card providers use to compute finance charges for any outstanding balance you have. Even though you have offers from two companies that show identical APRs, you may pay more for one if they include new purchases in your average daily balance.

5. Check for additional features when choosing a card. Decide how much credit limit you need and where the card is accepted. You can find cards sponsored by organizations in which you hold a membership in order to benefit them every time you use your card.

Tips & Warnings

• Despite close scrutiny, you may find yourself with hidden transactions fees and exorbitant rates if you don't pay your balance each month. If that happens, don't hesitate to call your credit card provider and ask for a lower rate or transfer the balance to another card.