Credit Cards: What To Look For Before You Apply
You don't have to look very far to find a lender dying to get you to sign up for one of their credit cards regardless of your credit score. But how can you find the best one for you in a sea of options?
Though a simple concept, credit cards can be very complex when you are weighing them against each other. For all of us a credit card can just as easily tank our score as it can lift it up. Instead of applying for a few (never good) do your research first so you start off on the right foot. Here are a few things you should look for...
Fees are always a bummer - especially those that are tacked on whether you use the service or not. To keep your credit good you want to keep your balance low, which can be a challenge when lenders tack on fees. So when choosing a card go for one with no annual fee or one that is under $30. While it may seem like common sense people inexperienced with credit cards may think this fee is unavoidable when it isn't. Also look at fees for balance transfer (no higher than 5%) and making a late payment. If there are other fees added on take that as a red flag and steer clear. Many predatory companies target people with poor credit and overwhelm them with fees burying them in debt that snowballs every month as interest is added.
Secured or Unsecured?
If you have poor credit you may face a sea of rejections. Instead of applying and getting rejected consider getting a secured credit card first. How these work is you put down a security deposit and are issued a line of credit. This kind of card allows you to build up good credit behavior even with the lowest of scores. But when considering this option make sure you find a card where the bank reports to the credit bureaus so your good habits are documented. Also look for low interest and fees and that you have the opportunity to graduate that account to an unsecured card in the future. Being able to upgrade your account is essential - you get your deposit back while keeping the same line of credit on your report (the longer the line is established, the better).
Fair Grace Period
A grace period is from when the lender issues your statement to when the payment is due. If you make the full payment in that period you will avoid an interest charge. When looking at cards it is best to find one with an average grace period of 20-25 days (or more). Don't settle for one with no grace period if interest is something that you have struggled with.
Don't Get Distracted By Perks
Many cards offer additional perks when they are used. Some offer miles, others points and others give you percentage cash back. While all of these things are nice they are not essential. Don't get distracted by the perks of one card over another because when it comes down to it you may end up paying more in fees for a sexier card and hardly ever reaping the rewards.