July 7, 2006
You probably get numerous credit card offers every month. Many list terms that sound too good to be true, which often means they are: 0 percent interest, huge credit limits, free rewards — the list goes on.
Although good deals do exist (especially for people with a strong credit history), always carefully analyze all terms and conditions to know what you’re getting. By law, this information must appear in the card’s terms of agreement, but you have to know what to look for.
Make a chart to compare features for several cards side by side. Track fees and other charges, such as:
Here’s how to decode some other terms you’ll find in the card offers:
Annual percentage rate (APR): The interest rate you’ll be charged if you carry forward any balance due. Credit cards often have different APRs for purchases, cash advances and balance transfers, so make sure a low APR in one category isn’t offset by unreasonably high APRs in others.
If a low introductory APR is offered, note for how long and what the rate rises to afterward. Also ask whether the APR is “fixed” (may fluctuate, but only after you’re notified) or “variable” (can move unexpectedly, without prior notification).
Grace period: The number of days you have to pay your bill in full without being charged interest. Beware of short grace periods and note that there’s usually no grace period for cash advances, balance transfers or balances carried over from previous months — you begin paying interest immediately.
Cash advances: Although handy in emergencies, cash advances can become very expensive loans if you don’t pay them off quickly. Ask about each card’s cash advance APR, fees (whether per transaction or percentage of advance) and any other limits that may apply.
A few more tips:
Credit cards are a way of life in the 21st century. Just be sure to read the fine print so you get the card whose features match your needs.
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