If you want to make a credit card comparison to find the best one to suit your needs it is important that you have a clear understanding of the key features and terms.

While credit cards can be a quick and easy source of cheap or free credit if handled correctly, they can also be a very expensive luxury if you do not keep your discipline. Here we set out the key features and warn you of some of the potential pitfalls before you make your credit card application.

Credit card varieties

When you begin to research the credit card market you’ll find that there is a huge choice of products tailored to suit certain people and certain circumstances. You will find cards for students, people with bad credit ratings and free credit cards, to name a few. While these may have some features that appeal, it’s best to take a closer look before making any credit card application.

Annual Percentage Rate (APR)

APR is the rate of interest you pay on any outstanding balance and is a major factor in how much your credit card will cost you. When comparing credit cards you need to look at this first. APR is usually somewhere between 10 and 20 per cent and if you think you will have an outstanding balance on your new credit card it is vital that you find the lowest APR you can. Potentially the savings could add up to hundreds of dollars. Also, when comparing credit cards watch out for deceiving introductory APRs. These low rates will only last a few months, it is the normal rate that you will be paying after that which you have to compare.

Grace period

Almost all credit cards allow a grace period between when your monthly bill is issued and when you have to make a payment to your credit card account. This grace period is usually 28 days, which means it is possible to have almost two months between a purchase and having to pay back anything on it. You can avoid interest charges completely if you get then paid off by the grace period each month. The grace period helps you manage cashflow and avoid interest fees so insist on at least the usual 28 days.

Credit card APR

If you know you won’t be paying your card bill off in full each month you need to know how interest is calculated. Not all card issuers calculate interest and charges in the same way. These methods of calculation include; Adjusted balance, average daily balance, daily balance, ending balance, double billing and previous balance. Of these adjusted balance is the cheapest, though average daily balance is used by most credit card providers.

Fees and charges

When making a credit card comparison, fees and charges can make the difference between a great deal and a terrible deal. You can avoid paying any fees if you pick the right card and use it wisely. However, other cards will hit you with surprise charges such as annual fees and registration fees, and penalize you if you are late with payments or exceed your credit limit. Read the small print and be aware of all fees and charges before you fill out your apply for a credit card.

Rewards

Many credit cards offer rewards for using your credit card, such as cash-back, discounts and free air miles. Rewards and privileges should not be the only factors you use to select a credit card for your needs.

Article by Richard from Click4Credit.com.au