Managing Credit Cards
by Max Hunter
Credit cards are almost a necessity in today's society. It has become harder and
harder to get through life without plastic. If you want to make purchases over
the Internet, guarantee a hotel room, or perform a wide variety of other
financial transactions, a credit card is essential. And, the truth is, credit
cards can be a valuable financial tool, provided you manage them effectively.
All credit cards are definitely not created equally and the first step to
effective credit card management is shopping around for the right card in the
first place. The factors to take into consideration are interest rates, annual
fees, other fees, grace periods and aspects like cash back or other rewards for
using the card.
One of the incentives credit card companies use to try to get customers to
choose their card over all the others floating around is to offer a special
introductory interest rate. An introductory rate sounds good, but can be a trap
for the unwary. Generally, the customer opts for the low introductory rate, runs
up the charges on the card, and is not able to pay the card off by the end of
the introductory period. That's when the 'after- introductory' rate kicks in,
and you find yourself paying from 12-20% on your credit card debt. When you are
interest rate shopping, you also need to make sure that the interest rate won't
take a substantial jump if you are late with a payment. Some companies bump the
interest rate if your payment is even a day late, and the change is permanent.
You don't ever go back to the lower rate.
Be sure to read the fine print. Credit card issuers have gotten fairly ingenious
about hiding a variety of fees that the casual consumer, who doesn't bother to
read all of the credit card details, may end up paying and not even be aware.
Annual fees are fairly straightforward. There are cards that charge annual fees
just for the privilege of carrying the card, and there are others that don't
charge annual fees at all. An annual fee is not necessarily bad, depending on
the perks that go along with it. If there are none, don't bother with cards that
charge an annual fee. On the other hand, if you have no credit history or a bad
credit history, you may have to get a card with an annual fee, and use it until
you can qualify for a different one. In most cases the annual fee can be rolled
into the monthly payments and doesn't have to be paid up front, although that is
not always the case.
Watch out for hidden fees like closure fees. Some companies actually charge you
for closing your account. The only way to avoid closure fees are to carefully
read all of the credit card's terms and conditions before accepting it and make
sure that no such fee is attached.
Late fees can be charged when your payment is late, sometimes even as little as
one day late. These fees can vary, but again are disclosed in the credit card
terms, so at least you are aware and can avoid them by keeping your payments
If you travel, beware of overseas transaction fees. Some card issuers have begun
to charge a 1-2% fee off the top for using the credit card overseas.
If you plan on paying off your balance in full each month to avoid incurring any
interest fees, make sure your card has a grace period that allows you to do so.
Some cards begin charging interest at the time of purchase. In that case, even
if you pay off your balance every month, you will still end up paying interest
to the credit card company. Make sure there is a grace period on your card -
that's the amount of time you have before you start incurring interest charges
and it's usually something like 25-30 days. Be sure to read the card disclosures
carefully so you will know if there is a grace period during which you pay no
interest, or not. If you don't pay off the balance of your account each month,
grace periods really don't make too much difference because you will be paying
Some credit cards offer additional benefits for using their card - things like
airline miles or a percentage of cash back on all your purchases. If you travel
a great deal or routinely use your credit card for all purchases and then pay
them off before the end of the month, these can be valuable additions. However,
be sure to read all of the fine print and make sure the perks aren't costing you
more in fees and interest than they are worth.
If you can't get by without a credit card, and very few of us can in this day
and age, at least be aware of all the different types of offers that exist and
choose the one that will benefit you most in the long run.
Max Hunter is the author of many credit related articles. If you are looking for
help with Payday loan or any type of faxless loans please visit us at