Good Questions About Credit Cards To
ensure that you chose the best credit card you should read the application,
not just the big headlines but the fine print as well. The fine print
is where you will find the terms and all the costs that the credit
card will charge. There are three major things to consider when choosing
a credit card company. Look at their APR or Annual Percentage
Rate. If you plan to carry a balance, this fee will be very important.
However, do not be fooled by a low introductory special APR, most
of these are for a limited amount of time such as 3 months, 6 months,
and 12 months and then the APR will raise. You should also
read the fine print to learn if the APR is fixed or variable.
If you chose a credit card with a variable rate, you can expect
it to go up and down usually the same as the prime rate. A fixed
rate will stay the same unless you are given notice by the credit
card company, that the rate is going to change. Learn
what your grace period will be. This is the amount of time
you have to pay your balance in full before you will be charged
interest. Do not forget to look for other fees. It is
best if you plan to pay your balance every month then you
should not apply for a card with an annual fee. It you are
going to carry a balance then it may be worth the fee if
the rate is low. There may also be hidden fees. Other fees
to watch for include balance transfer, cash advance, exceeding
your credit limit, or late fees. After you have read
over all the terms and still have questions, it never hurts
to call ask questions. You should understand exactly what
you would be charged for all other pertinent information
regarding other fees, APR, etc… The
best way to try to lower your interest rate is to contact
your lender and try to negotiate a lower rate. Many
times, a credit card company is afraid of losing a
loyal customer and will be willing to work with you
so you can have a lower interest rate. This may not
work, however, if you do not have a stable relationship
with your credit card company. If you always pay on
time, then you have a much better chance. If
your credit card company refuses to negotiate, you
can always transfer your balance to new lender that
offers a lower rate. However, be careful. If you
find one that offers a lower rate this rate may only
be an introductory rate and may change to a higher
rate at the end of the introductory special. You
may find out that you will be paying more in the
long run than you are now. Of
course, the best way would be to pay off your
credit card debt with just one payment. However,
many times this seems to be impossibility. The
second best way would be to pay off the credit
card that charges the highest interest rate first.
These means you have to pay as much as you can
on that card and then only pay the minimum payment
for any other credit cards. Then once you have
the credit card with the highest interest rate
paid off, you can then do the same thing with
all of your remaining credit cards until they
are all paid off completely. Another way,
which is not always a good idea, is to get
a home equity loan to pay off your credit card
debt. However, if you do not pay back the loan
you can put your home in jeopardy. You
can also transfer your balances to lower
interest rate credit cards. No matter
what way you decide to pay off your credit
card it is always best to watch any and
all new spending. You do not want to add
more debt to other credit cards while reducing
the balance on another. It
is best to close credit card accounts
that have a zero balance? Not always. If you have a good credit card, with a low interest rate, it may be good to hold on to it in case of an emergency. Further, having credit available to you that you do not overuse (use no more than 30% of the available balance), helps your credit score. If you close the card, then the payment history stops in the eyes of the credit bureaus. Thus, you lose your opportunity to let this particular card help with your credit rating over the long term. Remember, length of time that you have had credit is a big factor in your credit scoring. On the otherhand, some reasons to close unused
accounts include: - Eliminates the temptation to overspend, and put you further in debt
- Unused accounts that are open and have
credit available are targets
for criminals in case your credit
cards are lost or stolen. Since they are unused, you may not even be aware that the card is missing until it is too late.
- There
may be annual fees that apply
whether you use the credit card
or not
- It is also possible
that when applying for credit,
other lending companies may
think you are a bad risk if
you have multiple open accounts
with large amounts of available
credit.
- If you do close
accounts on unused credit
cards, it is always best
to cut up the cards before
discarding.
- Merchant cards always have high interest rates. They also negatively impact your credit score. You might consider discontinuing the use of merchant cards in favor of a regular bank credit card.
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