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Financial Education

Charge It Right

Shopping for Credit Cards

Not all credit cards have the same terms. This can be confusing when you are shopping for credit cards.

Here are some important credit card terms you should look for.

Annual Percentage Rate or APR: The APR represents the rate of interest you are charged plus fees, expressed as a yearly rate. If you plan to keep a balance on your credit card account, you want to look for a low APR. If you expect to pay your bills in full each month, it will be more important to compare the annual fee and other charges.

Fees: Check how much you will pay for annual fees, late fees or over-the-limit fees.

Grace period: The grace period is the number of days you have to pay your balance before a creditor starts charging interest.

Balance computation method: This will determine how your interest is calculated. There are a variety of methods. The most common is the average daily balance.

Sample Disclosure:

It is important for you to understand these credit card terms.

Interest rates can be fixed or variable. Fixed rate means the interest rate will not change. Variable rate means the rate can increase or decrease. You need to understand how your payment is affected by the interest rate.

When looking at different credit card offers, use this Comparison Chart so you can compare each offer side-by-side.

When shopping for a credit card, consider the following:

• Decide how you will use the credit card and what you will purchase with it.
  
  
• Start small. Don't charge too much on your credit card until you get comfortable with the monthly bill.
  
  
• Shop around for the plan that best fits your needs. Make sure you understand the terms of the plan before you accept the card. Read the fine print.
  
  
• Beware of introductory rates. You might start out with a credit card that has no annual fee for the first year, but you will be charged a fee in the second year. You might start out with a low interest rate and then find the interest rate is much higher after a few months.
  
  
• Make sure you understand the implications of fixed and variable rates.

You should now recognize some of the terms to look for when shopping for a credit card. Next, let's look at how to apply for a credit card.