Pay attention to detail when picking a new card

By Susan Jane

Credit card offers are everywhere, making it difficult to sort out the charges and benefits associated with them all. Here are some tips to ensure that you find the best credit cards for your needs.

First, don't rush the process of acquiring a new credit card. Take time to evaluate whether a particular card offer is the right one for you and your lifestyle. There are many factors to consider. (More about those factors later.)

Also, be sure to research how your existing credit cards stack up against the one you are considering, as well as what other providers offer. This will be time-consuming because the extent of information on each company's website and in its other literature is usually quite comprehensive. Use a systematic approach and don't be overwhelmed.

Set up a tabular chart so you can see at a glance the information regarding all aspects of the credit cards you are considering. Here are some topics that you will want to address:

• Annual service fee. Note the amount of the annual service fee for each credit card.
• Interest-free period. Ascertain the extent of the interest-free period, as this can vary from one credit card provider to another.
• Interest rate. The interest rate is vitally important. Some offers have a low interest rate for a set period, then it increases. Make sure you know what the higher interest rate is, as well as the one offered to get you on board.
• Late payment charges. These charges can sneak up on you if you don't make your credit card payment on time. Check the amount of this charge.
• Transfer of existing credit card debt to a new card. If this facility is offered, tick all the boxes before committing to a debt transfer. Is the interest rate on the existing debt going to be higher than for new purchases? What charges will you incur with your existing credit card provider if you transfer the debt and cancel that card? Are there any other disadvantages to this, such as an additional annual service fee or any exit or cancellation fee for the credit card you intend to cancel?
• Reward schemes. The range of reward programmes linked to credit cards is extensive. You should analyse these before you commit to a particular offer. Frequent flyer schemes are no good for a person who doesn't take flights very often. A better scheme could be one that offers goods or gift cards to spend at designated stores.
• Purchase protection insurance. This is an additional optional service that some credit card providers offer their customers. It is usually linked to an insurance company, allowing the credit card user to insure goods purchased with their credit card. Don't double up on insurance if your existing house and contents policy is sufficient for your needs.

If you have had a credit card with a particular supplier for many years, you will have achieved a good credit score, provided you have made your payments promptly and not overspent on your credit limit. By changing credit card providers impulsively, you might have to start from scratch to get your credit score to that same point with a new provider. Look before you leap.

Article by Susan Jane

Published: July 23, 2009