Credit Report Repair

Plain English Credit Cards: Understanding Credit Card Jargon

cmubag

The banks are constantly hitting us up with credit cards offers. So how do you cut through the marketing spin and actually figure out the difference between the credit cards and pick the best credit card for your needs?

In order to compare credit cards you should understand the main features found in many credit cards.

Balance Transfer APR: APR stands for annualised percentage rate and is the equivalent annual interest rate. With a balance transfer the APR is the rate that applies for an introductory period on balances you bring across from existing store or credit cards with outstanding balances. Look out for transfer fees which are upfront fees calculated as a percentage of the balance transferred.

Introductory Purchase APR: This is the interest rate that you will pay on purchases for a promotional period once you take out the card. Don’t get caught out by these intro offers, check out the small print to see that you won’t get stung if you still have balances owing when the offer period expires.

Purchase APR: This is the standard credit card APR charged on purchases. The right card for you is going to come down to how you will use the card; if you’re not going to pay your bills in fill then a low interest card will save you more than you would earn in points, however if you do pay in full then interest won’t be your main priority.

Interest free days / grace period: You may see claims such as ‘up to 55 days interest free’ advertised. This is the time period from making a payment until the bill is due. Look for cards with a long grace period as this will give you a longer period between making a purchase and the due date each month to avoid any interest charges. If there is no grace period the you’ll be paying interest from the day or purchase and you’ll be hit even if you pay your bill in full and on time each month.

Annual Fee: most cards have now dropped their annual fees but you may find that some premium cards do still charge an annual fee in exchange for extra features. Alwats ensure that the value to you of extra features such as insurances are greater than the annual card costs.

Rewards scheme: Rewards schemes come in all different shapes and sizes such as cash back, shopping rebates, points, airline rewards and much more. Do some basic math before you apply and calculate if the rewards your liekly to earn will be greater than the interest and fees. If you want a card with rewards then make sure the rewards on offer are for things that you really want, ideally things that you would have had to pay for otherwise. The value of the rewards for each dollar you spend if normally very low, around one percent so never spend extra money on things you don’t need just to boost your points balance.

Next time you’re looking for a new credit card you should have a good understanding of how to compare credit card offers side by side before you apply. There is no card that is the best for everyone; you just need to pick a card that will work for you.

This article is by Richard Greenwood a keen consumer advocate helping consumers getting a better deal. Richard runs www.compareyourbank.com.au

Reviews

Leave a reply