October 2006:
Shopping for Plastic:
What to Look for in a Credit Card

Question: What could save you more money this holiday season than a sale? Answer: Obtaining and using the right credit card for your purchases.

The winter shopping months are quickly approaching! If plastic will be your payment tool of choice and you are in the market for a new card, be sure to research your options.

Comparison Shop
Rather than waiting for pre-approved offers to land in your mailbox, actively shop for a credit card. Some of the best deals can be found close to home: the financial institution you already have accounts with. You can also find and compare credit offers easily on the Internet, and sometimes even apply online.

Check the Annual Percentage Rate (APR)
No consumer debt is best, but sometimes carrying a balance for a few months makes sense, particularly for big-ticket items. In that case, the interest rate matters. Look for a credit card with the absolute lowest rate, and for the longest period of time. Be aware though, that even low “fixed” rates can change – miss one due date and the APR may zoom.

Beware the Fees
When researching offers, pay special attention to the fees that a credit issuer can charge. Some are avoidable, others aren’t:

  • Annual fee
    If your credit is good, you should be able to get a card with no (or a very low) annual fee.
  • Cash advance fee
    Think you’ll take cash out of the credit account from time to time? Know the origination fee (it can be up to three percent of the withdrawal) and the APR – in many cases it’s higher than for purchases.
  • Late-payment fee
    Know what the company will tack on if you do make a late payment – some charge far more than others.
  • Over-limit fee
    Nearly all creditors assess a penalty if you go over your credit limit – it’s usually about the same as for a late payment.
  • Set-up fee
    Find out if the creditor will charge just to activate the card. If you have a great payment history, there is no reason to pay a set-up fee.

Know Your Credit Limit
How large of a credit line should you get? The answer depends on several factors. If you’re in the market for a mortgage, too much available credit may be held against you. Also, can you really handle a credit line of $10,000? That is a very tempting amount of money! Of course it shouldn’t be too low for your shopping requirements either. Keep your needs and limitations in mind when card shopping.

Finally, read all of the terms of agreement carefully before applying. Take your time to explore all of your credit choices. After all, the right card can extend your shopping dollars – not only during the holiday season but all year round.