How to Compare Charge Cards

Several APRs exist on each charge card you use.

Establishing a good credit history is important for such things as obtaining loans, renting apartments and buying cars. One way to establish a good credit history is to responsibly use one or more credit card accounts, or charge cards, over the course of several years. If you make payments on time, keep your balances below your card issuer's recommended percentage and only use the card when necessary, you are on your way to building a good credit history. Compare the terms and conditions of each card before making a decision on which card you will get.

Instructions

1. Compare the annual percentage rate for purchase made with the cards. Many credit cards will offer an introductory APR and revert to a standard purchase APR after a certain amount of time. For example, your introductory APR for purchases may be 8.99%, but your standard purchase APR may be 15.99%.

2. Research the APR for any balance transfers. You can transfer existing balances to new cards at an APR specified in the card's terms.

3. Determine the APR for cash advances. Cash advances occur when you withdraw money from your credit card account at an ATM.

4. Compare the penalty APRs between the cards. The penalty applies when you make a late payment, go over your credit limit or make a payment that is returned. Additionally, review how long the penalty APR will apply to your account.

5. Review the specifications on how to avoid interest on charges. You may be able to avoid interest on your purchases by paying your balance in full by a certain date each month.

6. Compare the credit limit on each card. Although higher credit limits give you access to more credit, you run the risk of overextending yourself if you use more credit than your income can sustain.

References

• Federal Citizen Information Center: Choosing a Credit Card
• Federal Reserve: Understanding Your Credit Card

Resources

• Federal Reserve: Credit Cards