How Do I Discover the Best Credit Card?

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Being a savvy credit card client takes a lot of research. There’s no use rushing into things and choosing the first credit card offer you lay your eyes on, just to realize later that it’s the worst possible deal. Finding the best credit card for you might take a while, but it can be rewarding in terms of utility and low rates. These products aren’t universal panacea; you must first consider how you plan to use the credit card and only then you can find the best option for you.

How to research the best credit card options

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One of the most reliable sources that can provide you accurate and objective information on the status of credit card issuers, types of credit cards and hidden interest fees is the credit card survey provided by the Federal Reserve website. The website is also extremely useful if you’re not familiar with the different types of APRs (annual percentage rate) that vary with the type of transaction you make, glossary and explanations on credit card agreement clauses, the best credit card management and credit card debt management strategies.

Criteria to analyze in order to choose the best credit card

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Annual fees

The annual fee is a sum of money you must pay every year to the credit card issuer in order to be able to use their credit card. The annual fee can be as high as $300. Fortunately, only 10% of the credit card issuers still charge an annual fee, mostly for secured credit cards, reward credit cards and premium credit cards. Even if you need these types of cards, proper research can save you from having to pay an annual fee.

However, if you’re forced to choose a credit card for which you should pay an annual fee, you have two options of paying this money – either as a whole sum charged only one time, or the fee can be divided so that it can be charged monthly. Opting for the best credit card in this circumstance means choosing the method of payment you’re most comfortable with. On the other hand, even credit cards for which you have to pay the annual fee have flexible payment clauses and sometimes you can have this fee waived after negotiating with the credit card issuer representatives.

Credit card companies can change the terms and conditions in the contract without needing your written approval. They are forced to send you an advance notice concerning the changes regarding fees, billing, interest rates and other problems, but this does not change the fact they are free to modify the information you’ve spent so much time analyzing. When it comes to annual fees, these companies must notify you 45 days in advance. If you don’t agree on the new fee, you are free to reject it, but this means closing your credit card. This is not always a good option, as it can affect your credit score. If you’re concerned with the fluctuation in annual fees policies, then the best credit card you can choose is the one issued by a company known for its stable contract policy.

Interest rates or APRs

The interest rate is a sum of money you have to pay for borrowing from the credit card company. In other words, it is the price you pay for money. For credit cards, the interest rate is known as APR or annual percentage rate, which can be either fixed or variable. In reality, both types of rates can change, especially since, according to the latest laws, the credit card issuers are allowed to change the fixed APR with only an advanced notice and in certain circumstances detailed below. Of course, from the perspective of the APRs, the best credit card is the one with the lowest interest rate.

Situations when the credit card issuer can modify the APR

As previously mentioned, the APR can only be modified if the credit card company sends you a 45-day advanced notice informing you of the rate increase and the possibility of opting out of the new rate and keep on making your payments at the old APR. In theory, the fixed APR cannot change as long as your account is open. However, when you are more than 60 days late in making your payments, or you’ve gone through a debt management program, the credit card issuer is free to change your interest rate even on fixed APRs. The credit card company offers their clients the possibility to negotiate a lower APR or even turn the variable APR into a fixed one. This is the privilege of the clients who:

  • Have a long-term history of timely payments;
  • Have a good credit score;
  • Have rarely or never exceeded their credit limit;
  • Have proof for the responsible overall management of the account.

Keeping these in mind, customers often wonder which the best credit card is – the one with variable or fixed APR. The credit card with fixed APR offers two apparent benefits – you have an increased access to an advance and a higher chance to opt out. Even so, while opting out can save you a small amount of money, it also hurts your credit score. In the end, if you make your monthly payments in full, you are spared the effort of paying any type of APR, whether you choose a credit card with fixed or variable APR.

The APR also varies with the purpose of your transactions. This rate is different for purchases, cash advances and balance transfers. You might even end up paying a penalty APR, which is one of the highest fees for credit cards, if you make payments that are returned, or if you’re always or only occasionally late in your payments. As opposed to this, you can take advantage of the introductory rate, which lasts for minimum 6 months. The introductory APR is an incentive for customers to acquire credit cards and they can either be lower than the APRs set after 6 months of using the credit card, or they can be zero. Obviously, the best credit card is the one that offers zero introductory rates for as long as possible.

Other criteria you must analyze in order to identify the best credit card are credit fraud protection strategies, purchase and cash back rebate, added travel advantages and retail gift cards. Considering only one of the criteria is a wrong approach in choosing the best credit card. The Federal Reserve website features different tools for you to use in comparing the pros and cons of various credit cards, including a credit card repayment calculator.