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Choosing Credit Cards
What's right for you?
Thousands of banks offer many different types of credit cards. It's important to remember that all credit cards are not created equal. Each offers different interest rates and annual fees. The best choices are based on your needs and budget.
Responsibility
Ask yourself if a credit card is right for you at this time. If you don't have the means to pay off the items you charge in a reasonable amount of time, it might not be your best option. Decide if a credit card is a good idea for you, then shop for the card with the best features.
Annual fee
If you plan to pay your balance in full each month, shop for a card that has a grace period and carries a low or no annual fee. Even if the interest rate is higher, it will not affect you because you won't be carrying a balance.
Interest rates
If you think you'll be carrying a balance, look for a card with a low interest rate. The annual fee may be slightly higher, but in the long run it will be cheaper than paying high interest rates on your balance.
| Balance |
Interest Rate |
Minimum monthly payment |
Years to pay off |
Total interest paid |
| $ 1,000 |
18% |
$ 20 |
7 years + 7 months |
$ 803.97 |
| $ 1,000 |
12% |
$ 20 |
5 years + 9 months |
$ 373.43 |
Try your own calculations. Find out how long it will take to become debt free and how much you'll pay in interest by making the minimum monthly payments.
Credit limit
If a high credit limit might create a temptation to spend, ask your credit card issuer to give you a limit of several hundred dollars or whatever number is right for you. That way you'll have to make a conscious decision to go over your limit, rather than giving in to a spending binge.
Evaluating a Credit Card Offer
When you are making choices about credit, your banker is a good place to go for information. Call or visit your bank, as well as other banks in the area or those that visit your school or organization. Many banks market cards nationwide, so you may also want to check magazines and newspapers. Be sure to ask:
- What is the annual percentage rate?
- Is the interest rate fixed or variable?
- If the rate is variable, under what conditions will it change?
- Is there an interest-free grace period? If so, how long?
- If I don't pay my bill in full, how is the interest calculated? Do I lose the grace period?
- Is there an annual fee?
- Does the bank charge other fees for going over my credit limit or making a late payment?
- What is the interest rate for cash advances? Is there an additional fee?
- Does the card offer benefits such as airline or hotel frequent purchase programs, insurance, or special discounts/rebates?
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