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Smart Strategies to Shopping for a Credit Card
Regardless of whether a consumer is shopping for a new home, in quest of credit to run a small business or a looking for a new credit card, a comprehensive comparison is vital. Shopping for the right credit card can be the difference between paying a hefty cost for the privilege of borrowing versus maximizing one’s purchasing power.
Credit Card Application Objective
Everyday consumers from all occupations are inundated with legitimate and illicit credit card offers. From email to junk mail, choosing the correct credit card requires the same type of careful shopping as it does to buy a new car. Just like every automobile is not conducive for all drivers, the same rule applies to credit cards and consumers. Prior to scouring through innumerous credit card opportunities, first consider your credit card objectives:
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How do you plan to use the credit card?
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Do you need a new credit card to consolidate other debts?
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Do you need the new credit card to make small business purchases?
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Would you like to save money?
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Are you in need of a cash advance?
Evaluating how you plan to use a credit card is the first step to practicing intelligent personal financing. By answering the above questions, you can devise a list of credit card features to best save you money and maximize your purchasing power.
Create a Credit Card Checklist
Credit cards come with a myriad of features. Before you limit your credit card criteria to a low APR finance charge, it is important to remember that your credit card payment habit s will greatly affect how important an APR affects your overall savings.
Here is a list of standard features to add or remove from your credit card checklist:
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No Annual fee
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Lowest introductory APR
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Lowest long-term APR
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Balance transfers for the lowest long-term balance transfer rate
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Cash advances
Use the following credit card shopping strategies to help you prioritize the importance of each feature of your credit card.
Hypothetical credit card comparison:
Let’s say a consumer has an average monthly credit card balance of $3000 with a 14 percent APR with and an annual fee of $39 (annual finance charge + fee = $459). But if the same average monthly credit card balance were compared to a credit card with a higher APR of 17 percent and no annual fee, ($570) the credit card with the lower APR would offer the overall saving, $111. (Obviously, this example is based on a credit card user who maintains an outstanding balance of $3000 – each month).
Essentially, consumers, who do not pay the full balance of their credit bill each month, should shop for a low APR. Before signing up for any credit card, review the various terms of the APR and do not forget to evaluate and itemize other potential fees:
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Annual fees
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Minimum finance charge
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Transaction fee for cash advances
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Penalty rate
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Late-payment fee
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Over-the-credit-limit fee
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Transfer a Credit Card Balance
Ideally, the ultimate credit card transfer does not carry an initial interest rate. Since the APRs of most balance transfers are introductory rates, it’s best to start off with a 0 percent interest rate. Most credit card companies will charge a fee for making the credit card transfer. The fee should be approximately $30 for every $1,000 or three percent of the transfer amount.
If you plan to make transfers of $3000 or more, shop for credit cards with caps on the transfer fee. For instance, certain credit card companies will charge a total fee of $75. Remember that a balance transfer should not negatively impact your credit score but the cost of an exorbitant interest rate will cost more in the long run.
Save Money
Credit cards represent significant discounts in products, services and travel. To ensure the best savings, credit cards with a low APR and no annual fee are optimal. Consumers may choose between a credit card that starts off with a low APR or one with a long-term low interest rate. A long-term low interest rate can offer consumers a little security that their credit card bill be manageable if they experience an unforeseen financial situation.
But consumers should review the fine print of the credit card, because many companies have disclaimers that allow them to change an APR without much warning. Generally, consumers can contact their credit card company to bargain for a lower APR – but it depends on the cardholder’s payment history. Depending on a cardholder’s needs, credit card companies such as Chase’s Platinum Visa save their customer’s money on car rentals, travel insurance, and other nifty products and services. (Credit cards with shopping rewards usually carry a higher APR).
Choose a Lifestyle Credit Card
Be it a small business endeavor or to compensate for college expenses, credit cards simplify many diverse lifestyles. Nevertheless, credit cards designed for work and education have a few requirements. For instance, many financial institutions may request copies of a college student’s records before approving a credit card.
When business owners are approved for credit cards, the terms of the credit card policy mandates that the card must be used solely for business purposes. The guideline applies to making credit card transfers to and from business related credit cards – as well. To claim a return on your company purchases, search for business credit cards that offer rewards featuring the types or free products/services your company needs to fuels its productivity.
Analyze the Benefits
Credits with other incentives represent valuable savings. Shop for credit cards with fringed benefits that suit your lifestyle needs. Consumers who spend exorbitant amounts on fuel may consider a credit card with a rebate on their gasoline purchases. Regardless of what extras come with a credit card, be sure to research any extraneous fees.
Here are a few other credit card benefits to shop for:
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Get cash back on purchases
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Redeem points for free products, services and special offers
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Collect travel rewards such as bonus airline miles or hotel points
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Earn rebates on gasoline purchases, automotive services or towards the purchase of a new car
Maximize Buying Power
The underlying advantage of applying for a credit card can be found in the way it can lower a consumer’s debt ratio while raising their available line of credit. As long as you don’t exceed your limits, applying for a credit card is tantamount to maximizing your buying power.
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