7 Options To Consider When Taking Out A New Credit Card
How many times have you taken out a credit card based purely on its current interest rate or balance transfer option?
You may be surprised to note there are at least 7 elements worthy of consideration when you take out a new credit card. To judge a new credit card on just one or two options could easily result in a bad deal for you. You need to consider the following 7 options when you take out a credit card:
1. The Initial Concessionary Interest Rate And Period
Many credit cards offer a 0% interest rate on purchases for a limited period, usually six to nine months. This option can be very attractive particularly when you do not repay the balance in full each month.
After the initial period the rate reverts to the standard rate, usually in the 10 to 16% range although this can be considerably higher.
Some cards however have no interest free offer but have a much lower permanent rate, from about 6.9% (although it will vary in line with general interest rate charges).
If you are likely to have a long term balance (if you are unable to pay off the debt within the first 6 to 9 months) this option could save you money in the medium to long term. You will not be able to switch to this rate if you have taken the 0% initial rate offer.
2. A Monthly Interest Free Period On New Purchases
This relates to the period between your purchase of an item and when you will be charged interest on that purchase amount. Many cards have a policy of only charging from the payment date after the item appears on your card statement.
The effect of this is to give you between approximately 25 days and 56 days interest free credit on all purchases. Clearing your balance within this period will result in no interest being charged.
Some cards will charge interest immediately from the date of purchase and are therefore not suitable if you clear your balance each month.
3. The Annual Fee
Many cards have now implemented an annual fee. This fee is chargeable whether you clear the debt each month or if you roll over your debt.
4. 0% Balance Transfers
When taking out a new credit card you will normally have the option of transferring any outstanding balance to your new card with no interest charged for a specified period.
Although marketed as a "0% balance transfer" many are not totally free of charge. An increasing number now charge a one off charge of 2-3% of the amount transferred as an "administration chearge" for handling the transfer.
This is legally not an interest charge but it amounts to the same thing - you are charged a fee by your credit card company based on the amount transferred.
The availability of true 0% balance transfers is disappearing and in all likely hood will completely disappear sometime soon. If a 0% balance transfer is important to you take advantage soon, however be aware that many of these cards have higher subsequent interest rates.
5. The Availability Of Cashback
Many cards now offer cashback on purchases. This is usually is between 1/2 and 1% of new purchases (excluding balance transfers and cash withdrawal). If you do not repay your account in full each month take this into account when considering the interest rate chargeable.
It is only where you repay the card in full each month that this is a true cashback on purchases and if you do repay in full each month you may choose to make this a priority.
6. The Rewards And Discounts Offered With Your Credit Card
Rewards are where you can purchase goods or services at a discount by using your credit card, or you have free insurance on purchases made using your credit card.
In the credit card business nothing is free. If there are rewards offered the cost will be built in somewhere (usually a higher interest charge) so compare with other cards not offering the same rewards.
7. Credit Card Payment Insurance
Whether you take this option or not most cards now offer some sort of payment protection insurance in the event of sickness and disability. In the past this cover was limited to paying the minimum monthly payment however many cards now pay 10% of the balance on the card at the time your claim commences and may be worth considering.
Be very careful with this insurance as it will exclude any condition you suffer from when the cover commences and similarly any redundancy announced before the cover commences.
Taking out a new credit card is more complex than it seems at first. As you can see when considering a new credit card there are a number of aspects which must be taken into account and t can be very difficult choosing a new card.
There are many comparison services available that can help you cut through the confusion and I suggest you consult one or more before making your decision.
In all cases prioritise your requirements and only apply for the credit card which best matches your circumstances. Don't just pick the card with the longest balance transfer period or lowest interest rate as it may cost more in the longer term.
A Card for Those Who Have Poor Credit
Don’t you just hate it when these big-name credit card companies keep turning down your application for a credit card simply because of some financial mistakes or missed payments that you made in the early years of your career, which adversely affected your credit rating? If only you could speak to the account officer handling new applications and politely inform him that you have long since settled those debts and, now that you are gainfully employed, can handle the responsibilities a credit card brings, right? Well, you don’t have to go to such extremes and you don’t have to hope for a miracle because yes, you still can have a credit card. It may not be one of the major ones, but it still is a credit card.
Several credit card companies offer people who have the misfortune of having a less than stellar credit rating a chance to own their own bit of plastic money. The rise of these non-mainstream credit card companies may have been caused by the demand created by those who did not pass the stringent requirements of the big - name players. The credit cards provided by these companies still function like a regular credit card: these have pre-determined credit limits; are accepted in various retail establishments; give cardholders periodic increase in credit limits (naturally this would still depend on your performance as a card holder and your capacity to pay) and may probably even have a form of rewards program. Card holders enjoy almost the same benefits as those who hold well known credit cards. But what’s good about these non-mainstream cards is that they still report to the three major credit rating bureaus and, if you pay promptly and maintain your good standing, these cards will, in time, help improve your credit rating.
If you believe that these card companies only offer one kind of card for all possible clients, then you are mistaken because they do carry different kinds of credit cards – even for those who have been classified with poor credit ratings. There are standard cards for regular clients, and silver, gold and even platinum cards, which not only offer higher credit limits but also provide more security privileges and benefits, for customers who need more to sustain their lifestyle. If you’re concerned about international acceptance, you don’t have to worry because most of these credit cards are recognized by Mastercard.
If you feel that you really need and deserve a credit card but keep hitting a brick wall when you approach the more established and more popular credit card companies, why not consider using one of these non-mainstream credit cards – at least for the meantime. They may not have the same appeal as the big – name brands but as long as you get similar service, would the name even matter? Who knows, maybe after you’ve gotten used to carrying these cards, you may not want to give these up for one of the high profile credit cards you originally wanted.