What To Look For When Choosing Credit Cards

First Published Date : December 23, 2010 ADawnJournal.com

When it comes to picking a credit card, you will be bombarded with a wide array of options and an overload of information. This will make you even more confused, even if you are not confused enough yet. Today, I will discuss some factors you need to consider before making your decision.

Annual Percentage Rate or APR

Annual Percentage Rate or APR is the interest you pay to your credit card company for carrying a balance. In other words, this is your cost of not paying balances in full every month and using the credit card company’s money. If you pay off your balance in full, you don’t need to worry about Annual Percentage Rate or APR that much. This will give you more flexibility to pick credit cards with other features. If you carry a balance, pick a credit card with the lowest APR possible. Make sure the APR is not a promotional one and available only for a limited time. Picking the lowest APR credit card will save you tons of money for the lifetime of the loan.

Annual Fee
In general, try to avoid any annual fee. However, if you carry a balance some credit cards with annual fees offer lower interest rate or APR than those cards with no annual fee. Do the math and if you find out that an annual fee credit card will save you more money in terms of carrying a balance, pick an annual fee card with the least interest possible.

Balance Transfer

Some credit cards will give you a balance transfer option with a low introductory APR. You need to make sure of a few things before you jump into this feature to save some money. I have discussed this in another article and I recommend you read it here: How to Use Your Credit Card Balance Transfer to Your Advantage

Grace Period

Grace period is the time you have to pay off your balance after making a purchase without paying any interest. If your credit card does not have a grace period, you will start paying interest as soon as you make a purchase. In many countries, there are credit cards with no grace period. In Canada starting in 2010, due to the federal government’s new credit card regulations, federally-regulated financial institutions are now required to provide at least a minimum 21-day grace period on new purchases, and this is applicable on new purchases when you carry a balance as well.

Rewards Credit Cards

These days, I see no point in using a credit card without any rewards. A rewards credit card offers you points or rewards just for using it. Rewards can be in the form of cash back, Air miles, Aeroplan miles, merchandise, and so on. I prefer cash back, as it does not restrict you to using your points on anything specific. If you use reward points or miles, make sure they don’t expire and are easy to use without restrictions and hassle.

A Few Other Things to Look For:

I always make sure your credit card provides the following:

– Free Purchase Warranty: This feature protects your purchases against theft, loss, damages, etc. for 90 days or so depending on the credit card company.

– Free Extended Warranty: This feature doubles the manufacturer’s warranty for an additional year.

– Free Price Protection: This feature refunds the difference if you see the same item you bought at a lower price anywhere else.

– Free Collision/Loss Damage Waiver for Rental Cars: This feature insures you for rental cars if it’s lost or damaged. You save money on the rental company’s insurance that otherwise you would have to pay.

- Free Travel Accident and Baggage Delay Coverage: This feature covers you from travel accident injuries and baggage losses or delays.

It is important to note that you may not be able to get all the free features I mentioned above in one card. What I do is carry two or three credit cards giving these free additional features and whenever I need a feature covered, I use the credit card with that feature. A Dawn Journal has a credit card section with lots of credit card articles. Make sure you read them and don’t for get to recommend A Dawn Journal to your friends and family.

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