Which features should I be looking out for?

Just like snowflakes, no two Credit Cards are exactly alike. While some cards try to tempt you with low interest rates, others have an enticing rewards program or cash back deal. Some platinum cards even come with a 24 hour concierge service that can organize anything from concert tickets to accommodation anywhere in the world – though the value of such a service to all but a select few seems questionable.

As a general rule, Credit Cards tend to be strong in some aspects and weak in others. Those Platinum cards that come with a ‘free’ concierge service typically attract annual fees of at least several hundred dollars. Likewise, other cards might be marketed for their low fees but sacrifice luxuries like reward programs, free travel insurance and the like. Whilst this might seem like a reasonable trade-off, depending on how much you’re spending every month you might be really missing out.

Ultimately, the idea is to find the card that is right for your own personal circumstances. I’m ashamed to say that I occasionally break the cardinal rule of paying off your balance in full every month, so in my case I prefer to go for a card with a low interest rate. Even though I’d like a rewards program, the reality is that the amount I’m saving in interest charges is far higher than anything I could get from a frequent fliers program.

Listed below are some of the different features you might need to think about. Keep in mind that no card will be strong in all areas, so you’ll need to figure out which features will save you the most money in the long term.

• Annual fees: These can vary from zero to over a thousand dollars a year. Higher annual fees usually indicates more ‘bells and whistles’. Platinum cards generally charge at least 200$ in annual fees.
Tip: If you only intend to use your card once in a blue moon, you’re better off with a no annual fee card.

• Interest rates: The interest rate on Credit Cards is expressed as an APR or ‘annual percentage rate’. The APR is the cost of credit to you over a year, not including fees and other miscellaneous charges.
Tip: If you have a tendency to pay your bills a little late, look at the APR of a credit card very carefully. The difference between 15% and 17% may not seem like a lot right now, but over several years (or even several months) this difference can easily equate to hundreds or even thousands of dollars.

• Introductory interest rates: These days, many Credit Cards offer a special introductory or ‘honeymoon period’ on interest rates that generally last for between 6 months and a year and then defaults to a regular, higher rate. These offers are typically confined to Balance Transfers (moving a balance across from another card), but sometimes include new purchases. An introductory rate can be a useful reprieve while you pay down other debts, provided you stick to all the terms and conditions and use your time productively.
Tip: Look carefully at what interest rate you will be paying when the introductory offer ends, otherwise. Note down the date when your rate reverts and try to be balance free at least a month in advance.

• Grace period: This is the number of days you have to pay for something you purchased on your credit card without incurring any interest fees. This usually varies from between 30 to 55 days. You won’t be eligible for a grace period if you carry any revolving debt on your card, so if you don’t plan to pay your bills off on time and in full every month a card with a grace period will be worthless to you. Another important note is that the interest free period does not apply to cash advances (like taking money out of an ATM).
Tip: As obvious as it sounds, the golden rule of using a credit card is to pay your bills off on time. Generally speaking, credit cards charge very high rates of interest and should NEVER be used as a substitute for a loan.

• Balance transfer rate: Credit card issuers are extremely enthusiastic for you to move your debt to them and away from their competitors. As a result of aggressive marketing practises, many cards now come with a very low introductory balance transfer rate – usually between 0 and 4 percent – to try and tempt you. While you can use the banks greed to your advantage, it’s important that you always stay vigilant – assorted fees and charges usually apply that you’ll need to watch out for.
Tip: If you have high outstanding credit card debt you may benefit greatly from a balance transfer. Remember to check for transfer fees and take careful note of what your rate will default to once the initial low interest period expires.

• Reward programs: Credit Cards and reward programs have become synonymous over the past few decades, but be careful – if you don’t pay your bills in full every month, your only reward may be a huge pile of high interest debt.
Tip: Typically, you’ll need to spend many thousands of dollars before you receive any meaningful rewards. If you’re spending under 10,000$ a year with your card don’t bother with a rewards program but instead opt for other features like a low interest rate or annual fee.

Every Credit Card is different. The best Card for you will depend on your own spending habits and financial circumstances so don’t let anyone convince you that their Credit Card is the best. Picking a card that has the right balance of fees and features for you isn’t easy, but it’ll save you a whole heap of money in the medium to long term.

Stay tuned for Part 3!

Related posts:

1. The ‘Credit Card for Newbies’ Guide (Part 1)
2. How to find the best card for YOU!
3. The College Student’s Guide to Credit Cards
4. Mega Guide: How to Get Out (and stay out) of Credit Card Debt
5. Credit Card Review: Discover® More(SM) Card