How to Choose a Credit Card Worksheet
Choosing credit cards is much easier when you use a method to compare offers, according to the Federal Trade Commission. Organize your information by creating a credit card worksheet. Doing so will help you to understand the benefits and costs of each card. Make comparisons and select the card that benefits you most financially.
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Instructions
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Divide your worksheet into five columns marked with the subheadings card type, annual interest rate, fees, grace period and benefits.
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Select several cards from a reputable bank source or from offers mailed to you.
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Review each card agreement and copy the disclosure information in the appropriate columns for each card.
Compare Cards Using a Credit Card Worksheet
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Assess need and consider card type. Department store cards carry high interest rates and low limits. Opening too many retail merchant accounts may lower your credit score, according to the Federal Trade Commission. Apply for this type of card only if you have no credit. On the other hand, major credit cards usually offer more competitive interest rates, higher limits and are not restricted to a specific merchant. Charge cards operate like major credit cards, but their balances must be paid off each month.
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Determine the annual percentage rate and fees. Beware of credit cards that offer low introductory teaser rates for a limited time. Current law requires creditors to disclose when the interest rate will change and how it is calculated. Examine all fees associated with the card. Credit card companies can charge annual fees ranging from $15 to $150, depending on the type of card. Find out how much the creditor charges for late payments, cash advances and to transfer balances.
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Check for a grace period. Most credit cards have a grace period -- a period where you can avoid interest charges by paying the balance before it is due. A card without a grace period can impose finance charges from the date the transaction is made or from the date each charge is posted to your account. Choose a card with a grace period if you intend to pay off the balance each month and wish to avoid paying interest charges.
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Determine how balance charges are calculated. The average daily balance is calculated by totaling your balances each day and subtracting any payments you made to the account, then dividing the total by the number of days in the billing cycle. Cash advances and new purchases usually are included. The adjusted daily balance method is not as profitable for creditors because it subtracts payments made during the current cycle, giving you till the end of the billing cycle to pay some of your balance without accruing daily interest charges.
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Compare card benefits. If the credit card has a high annual fee and a low credit limit, it may not be worth opening the account. Avoid applying for cards that offer reward points if you do not intend to use them or if cashing in the points involves paying a fee. Cards with no annual fee and low interest rates are usually a better deal than cards with credit for future purchases, rebates and other gimmicks.
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References
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