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Choosing a credit card

Choosing a credit card used to be, in the good old days, a rather simpler affair than it is now.

At the time of writing, the banks and other financial institutions are reluctant to provide anyone with credit, so, more so than ever, it pays to be very careful when picking your card provider.

But first you have to ask yourself how do you use your card? Is it there to give you extra funds, or help spread payments; will you pay it off fully each month, or will you pay only a percentage off each month.

If you intend to only repay a percentage, then go for a credit card which has a low APR (annual percentage rate), otherwise the interest charged on the amount outstanding will seriously hurt your wallet.

And if you’re attracted to a low interest rate, discover how long that interest rate will stay low for. Ideally, you want a fixed low rate, otherwise you might find that your low rate has seriously turned into a high rate after a few introductionary months.

Keep an eye open for annual, or monthly fees, which might seem a harmless way of offering you various goodies on your credit card, but fees can sometimes be punitive.

If you pay off your credit card each time, APR is not your top concern, but just check that the interest is not added once a purchase is made, and that the card recognises the ‘grace’ period, when no interest is charged between each period as long as the balance is paid in its entirety.

And try not to use your credit card as a cash card, as many providers charge extra for cash advances and usually when doing this, there is definately no grace period.

Also, consider what your card might offer you in terms of goodies, say protection if it is stolen and a debt run up in your name, or say cash back, or deals on certain retail opportunities, or travel incentives. The marketing men have a number of ways of attracting your attention, but just make sure you are not paying for your goodies in some other way.

Yes, credit cards are a vital part of today’s modern consumer society; just make sure it’s not costing you a packet to keep using one.