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The Ultimate Guide to Getting the Best Credit Cards

Owning one credit card in your lifetime may not be enough to survive a life that depends on revolving cash. Carrying multiple credit cards could help you and your family purchase basic commodities like food, shelter and clothing. Also, if you have an impeccable skill in handling these so-called plastic money, you can even pay for and get extras, like a second car, top-of-the-line gadgets and even that long dream vacation abroad.

Why Not Only One?

It is nearly impossible to satisfy your financial needs just by carrying one credit card. Creditors would not have any solid basis to grant you those important loans, like your mortgage or student loan. This is because your credit score is solely determined by a single credit card, and this is no doubt an unreliable credit history, isn’t it?

Go for the Long Term

But before you go on a spree in sending those credit cards application, you need to arm yourself with sufficient knowledge about these cards and be mindful of what credit cards offers to take.  Some credit card features are absolutely enticing, but could get you in a financial trouble. Some benefits you reap from credit cards apply only on a short-term basis.

Seek Advice from Experts and People Close to You

An expert tip when considering multiple credit cards application is to gather as many information from your family and friends about credit card products that give the best deals. It is also not a bad idea to seek the advice of a financial expert, like your office accountant or even your local bank officer.

Engaging on an online research will help, but this should not be among your priorities when gathering information. This is because it has now become more difficult to tell what information found in the Internet happens in real life.

Features to Compare

Once you have as many information you think you will need, it is time to do a credit cards comparison. Below are five essential features of any credit card that will help you gauge which card is a better than the other.

1. Interest Rate

Most financial experts would encourage you not to carry a balance on your next month’s credit card bill, but of course, there would be times that you would need to address important financial concerns and miss a full balance payment. Therefore, getting a credit card with the lowest possible interest rate should be on top of your feature considerations.

Just remember that published interest rates may also change depending on your credit score, so keep your expectations at a conservative level, especially if you have a bad to average credit score (below 500 to 679).

As you make your own feature considerations, credit cards companies also consider your credit score when qualifying you for a credit interest rate. So, it might be helpful to get a copy of your credit report from any of the credit bureaus.

2. Rewards

Credit cards deals also include rewards. This is where you may consider your own wants, lifestyle and goals. Some credit cards offer cash back when you purchase anything with the card they issued to you.

Others offer a certain number of miles based on a certain amount of purchase you made using their card.

These accumulated miles can be used to redeem airfare tickets to local and overseas destinations. If you are lucky, these credit card companies would incorporate different types of reward programs.

3. Sign Up Deals

If you are getting your first credit card and still learning how do credit cards work, an introductory deal would be the primary selling point of credit card providers to someone like you. Introductory deals could include a bulk of rewards or a 0% interest rate on the first year of carrying their card.

Keep in mind that there is always a catch to this deal, like spending a specific amount for a certain type of purchase within a specified period (example: get the initial $100 cash back if you will spend $1000 on groceries on the first month). So, always read the terms and conditions before signing up to see if the corresponding expense is worth the reward you get.

4. Service Fees

Maintaining a credit card obviously entails paying for several fees. When collecting credit cards information, always check what are the regular fees that may be included in your monthly bill. Credit cards info found on application forms may explicitly discuss these fees and this is where your analytical skills would come handy.

For your reference, the following are the most common fees that may be included in your monthly credit card bill total:

• Balance Transfer Fees

This fee is charged every time you move a debit balance from one credit card to another. It is usually 3% to 5% of the balance transferred.

When transferring your debt from one card to another, make sure that the savings from the interest would make up for this fee. For example, it would be unwise to transfer a balance of $500 to another card with an interest rate of 15%. In this case, it would be smart to just keep the balance on the same card and pay it off on or before the due date.

• Annual Fee

This fee may be common, but it turns most credit card applicants away. However, it is advised that you do a little math before you turn down a possible credit card approval. Use the annual fee, your estimated yearly expense and the amount of rewards you will get from the card for the year as factors.

For example, the credit card charges a $100 annual fee. Your monthly credit card expense is at $1000 a month. For every $500 spent, you get a cash back of $10.  Based on these figures, you are earning $120 more than what you are paying to carry that credit card. In this case, you might want to just shrug your worries off about the annual fee.

• Cash Advance Fee

This occurs whenever you withdraw cash from an ATM using your credit card. This sounds like a real benefit, but you will not be a happy camper once you check your bills for your credit cards online and find this included in total balance to pay.

Unlike regular purchases using your card, a cash advance entails a fee of up to 5% of the amount borrowed. It is unlikely for any credit card provider to offer a 0% interest rate on cash advances. This would be way too risky for the business and for you, too. So, avoid cash advances as much as possible.

Financial experts recommend you open a saving account where you can pull cash in case of emergency. To keep you secured, you are also advised to maintain an amount of deposit that is equivalent to at least a year’s worth of your estimated monthly expenses.

• Foreign Transaction Fee

This is the rate of the interest that accrues on the balance that you carry on your next billing cycle. Also, credit card providers will not tell you this, but it is with finance charges that they gain profit from their account holders.

The only way you could avoid finance charges from piling up month-to-month is to pay off your full balance on or before due date. Never settle paying for only the required minimum amount. You will regret doing this sooner than you expect.

Also, rewards cards typically have higher interest rates than a regular credit card with minimal perks. Therefore, it would help if you accurately gauge your capability to pay in full before activating or even applying for a credit card.

• Late Payment Fee

Apart from the finance charges, this is also where credit card institutions earn additional profit from cardholders. In addition, this fee is typically and unreasonably high because of the business risk that comes with paying your bills late. Remember, card issuers also forward your payments to merchants and their credit networks.

To avoid incurring this fee, enrol in your card provider’s auto payment program. This does not give you an excuse to miss or delay a payment, unless there are no funds in the payment option you enrolled in the program. In addition, some institutions give out rewards to those who sign up for the program. So, always be on the lookout for credit cards promotions as this program may be included.

• Over the Limit Fee

This fee is charged every time a purchase makes your total balance go over your assigned credit limit. This may not be an issue to most cardholders anymore because of The Credit Card Act of 2009.

This law enforces credit card providers to not allow users to exceed their limit, which triggers this fee. No worries though.  You can still opt in to your provider’s over-the-limit program to allow you to exceed your limit up to a certain amount. Just be aware and accept the consequences for getting this privilege.

• Returned Payment Fee

Returned Payment Fee could hurt your financial standing the most. Card providers charge an average of $35 if your payment is rejected or returned by the bank that carries the check payment you issued.

A rejection happens when the check bounced or has been declined payment by the bank due to insufficient funds. Apart from this fee, your bank may also charge you a certain amount for issuing a bad check. Not only that. Most card providers would block you from enrolling in auto pay programs if this happens.

Issuing a bad check could not only hurt your pocket, but also your credit standing and reputation. Make sure you have enough funds to cover your payment before sending the check or clicking that “Pay Now” button.  

What Type of Card is Best for You?

Most of these fees, if not all, apply to various types of credit cards. The question is what are these and which would fit to your needs, lifestyle and spending habits. The list below would introduce you to the most common types you will find in the financial market today.

 

1. Regular or Standard

If you are at least 18 years old and you meet the credit card company’s minimum credit requirement, the most basic card that you will receive is this type. This can be used for general purchases and would have a credit limit determined by the issuer.

2. Rewards Card

This type of card has sub-types based on the reward program included with the credit line. The form of reward determines the sub-type of this card. These are the following:

• Premium Credit Card

This is the subtype that includes credit cards services that are exclusive to cardholders with excellent credit standing with the credit card company that issued it. These exclusive services may include international auto and travel assistance, a round-the-clock concierge or personal assistant and exclusive access to airline lounges.

If you are qualified and have maintained an excellent credit standing with a financial institution for many years, it is not impossible to receive an invitation from them to open this type of account.

• Points Card

This sub type is what most starter credit card holders get from issuers. It may only include an average credit line, but this type entices you to use it to earn beneficial perks. The points earned can be used to redeem merchandise from partner stores, buy gasoline or even get an overnight accommodation at a plush hotel.

• Cash Back Card

This sub type returns between 1% to 5% of what you have spent based on issuer-determined spending tiers. When a certain tier is reached, you will be eligible to use the cash back to buy merchandise or receive a check in the amount you are entitled to.

• Airline Miles Card

Referred to as a frequent flyer credit card as well, this sub type entitles you to earn certain number of miles for a specific amount of money spent using the card. The miles you accumulate can be used to purchase airfare or offset car rental, hotel and travel expenses.

3. Secured Credit Card

This type is also known as known as a pay-as-you-go card, which requires a security deposit. The amount deposited would determine your credit limit, although some banks would only provide a credit line equivalent to 50% of what you have deposited.

If you can maintain a good credit standing for an agreed period, the issuer can upgrade your card to a standard one. Credit cards reviews highly recommend this card for people who are trying to control their debt and improve their credit score.

4. Specialty Credit Cards

Some organizations or well-known brand retailers issue credit cards in partnership with major financial institutions. This type is one of the easiest to get, especially if you are a member of the organization that provides it. The application process would not take long as the organization would help you with the documentation and submission.  This is also the type of card that would donate part of the purchase amount to charitable institutions.

There are hybrid credit cards that combine the features of these types and sub types, but these are usually offered to individuals that have above-average credit scores. If you are unsure about your credit standing, it is always best to start with a card with the most basic features, as well as with the easiest terms and conditions to follow.

At the End of the Day  

Always keep in mind that it is more financially impacting to own credit cards vs debit cards.  Using a credit card to purchase goods or services like paying cash that you must earn yet. Using a debit card on the other hand only allows you to purchase items up to the amount that you have already deposited in the account.

The only similar feature between the two cards is that you can use them in most establishments if they carry the logo of the major credit card associations like Visa, MasterCard, American Express and Discover.

Ultimately, it is not about carrying credit cards that work that will help you address your financial concerns. Effectively managing these cards will determine the benefits that you will reap from them and will help you avoid hurting your financial standing. It matters how you control your spending despite of how low the interest rate or high the perks are.

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