Comparison Shopping for Credit Cards

So, you clip coupons and drive around town looking for the best price on paper plates? Want to save some real money? Then take a closer look at what you are paying with! Many people comparison shop when it comes to certain credit issues such as mortgages or auto loans but then they take the first credit card offer that comes their way! Even those who do shop around and only look at the interest rate are losing out on potentially huge savings because they fail to really consider their spending and repayment habits. In fact, it's often the little subtleties that really add up.

Anytime you look at a credit card offer you should check the disclosure form. You should take a close look at the key terms, which are the annual percentage rate (APR), annual fee, grace period, cash advance fees, late payment charges, and over-the-limit fees. Take these items into consideration along with how you pay your bills each month. Do you always pay on time? Do you pay in full or do you only make the minimum payments? Do you carry a balance? How often are you likely to spend over your limit? The answers to these questions can really save you some money when applied to the decision of which credit card offers to accept. 

First, let's look at what each key term really means. The annual fee is a flat, yearly charge that's very similar to a membership fee. In fact, you are paying for the privilege of having their card. APR, or Annual Percentage Rate, is the cost of the credit. This generally includes the interest rate and may also include other charges. A finance charge is the dollar amount you pay to use the credit. Besides interest costs, a finance charge may include other charges - such as cash advance fees. The grace period is the length of time during which you can pay your bill without paying a finance charge. In most cases, the grace period only applies if you pay your balance in full each month. Also, grace periods hardly ever apply to cash advances. The interest rate is the percentage you are paying on any balances. These can change over time. Often it's "variable", which means that it's tied to the changes of the prime rate or other interest rates. Others are "fixed" rate plans in which the company just issues the rate.

There are several ways in which a credit card issuer may calculate the finance charge on your account. It's important to understand how each works and which method the card issuer will use. There are three main the methods that are used. These are the average daily balance method, the previous balance method, and the adjusted balance method. 

The average daily balance method (the most common) calculates the balance by taking the amount of debt you that was in your account each day during the period covered by the billing statement and then averages it. When the issuer uses the outstanding balance from the end of the previous billing period to calculate the finance charges, it's called the previous balance method. The adjusted balance method is derived by subtracting the payments you've made from the previous balance and then figuring the finance charges.

You should strive to find the best deal for your budgeting and repayment style. For instance, if you always pay your monthly bill in full, the best card is one that has no annual fee and offers a grace period for paying your bill without a finance charge. If you generally carry a monthly balance, you will want to look at the periodic rate that will be used to calculate the finance charge as an adjusted balance method would likely be the best plan for you. 

Here are some helpful tips that you may want to follow when shopping around for a credit card:

• Review all the information about the plan

• Write up a list of the features that best fit your needs and rank them according to importance.

• Call the institutions to verify the information that you received and to make sure it's the best plan they have.

• If you already have a card, call the issuer and ask if your rate can be reduced to match the offer you received from another issuer.

The type of offers you will receive will depend on your credit rating. If you haven't checked it lately, you should order a copy of your credit report. This way, you'll know if you qualify for a better rating or not. Also, by ordering your credit report, you'll be able to make sure errors are not causing you to have to pay higher rates than you should. Also, make sure you are selective in the cards you apply to. Each inquiry they submit to the credit bureaus will be placed in your credit report and if you have too many of them you could wind up paying for it with higher fees.