Credit card offers tend to stack up in your mailbox like bales of hay in an autumn field. Touting enticements such as zero percent balance transfers, zero annual fees, 100,000 bonus miles and more, they can be quite tempting.
However, you must be careful to read all of the fine print so you know what they’re expecting in return for their largesse. You also need to be able to understand it, as those agreements tend to be written in legalese.
To that end, here are the basics on how to evaluate a credit card offer to help you cut through the clutter.
To Thine Own Self Be True
It’s important to take stock of your needs and spending habits to make a sound decision about any credit card offer. This enables you to choose a card and a rewards program that will benefit you for doing what you already do.
It will also help you decide whether to select a charge card or a credit card. How much do you typically charge each month? Are you one to carry a balance form month-to-month? If so, what does it average?
You have to make sure the credit limit on the card will be well in excess of that amount, otherwise it could drag your credit score down because it will look like you’re using too much of your available credit. Examining your habits in this fashion will help you choose the best tool for your needs.
Take Interest in the Interest
What is the basic APR (annual percentage rate)? How is it calculated? Does it vary according to the type of transaction you’re conducting? Most of them do charge more for cash advances than consumer purchases. Does the APR change form time to time? What can trigger those changes?
Are the Fees Simple?
That super low APR might be hiding an insane annual fee. Or, you might have to hit a certain dollar amount in spending to get that super low APR, which is, in essence a de facto fee. How much are late payment fees? Are fees assessed against cash advances or foreign transactions?
What if you accidentally go over your limit, or a payment is rejected for some reason? Will you encounter punitive fees in those instances? And finally, are those fees rolled into your principal balance against which interest charges will be imposed?
Other fees of which to be aware are customer service charges; paper statement fees and credit limit increase levies.
How Rewarding are Those Rewards?
What do you have to do to earn them? Many come with spending thresholds you must meet to qualify. How much would it cost you to just buy whatever the reward affords outright? In a lot of cases, it might well be cheaper to buy it on your own, rather than spend a lot of money in charges to “earn” it.
What other requirements are in place to reap those rewards? Zero percent transfer offers used to accomplish a credit card consolidation typically come with a limited time factor within which the transferred balance must be paid off. Otherwise, you could see interest assessed against the entire transferred balance, going all the way back to the date you signed the agreement.
These are the main things to consider when you’re pondering how to evaluate a credit card offer. Paying close attention to these factors and choosing a card accordingly will help you get a card that works for you — instead of the other way around.
You’ll find additional useful information on this topic at the Federal Trade Commission’s Consumer Information website.