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If you want to make a credit card comparison to find the best one to suit your needs it is important that you have a clear understanding of the key features and terms.

While credit cards can be a quick and easy source of cheap or free credit if handled correctly, they can also be a very expensive luxury if you do not keep your discipline. Here we set out the key features and warn you of some of the potential pitfalls before you make your credit card application.

Credit card varieties

When you begin to research the credit card market you’ll find that there is a huge choice of products tailored to suit certain people and certain circumstances. You will find cards for students, people with bad credit ratings and no annual fee credit cards, to name a few. While these may have some features that appeal, it’s best to take a closer look before making any credit card application.

Annual Percentage Rate (APR)

APR is the rate of interest you pay on any outstanding balance and is a major factor in how much your credit card will cost you. When comparing credit cards you need to look at this first. Typical APR could be anywhere from ten to twenty percent interest per year so choosing a low interest card is essential if you can’t afford to repay bills in full each month. It could save you hundreds of dollars. Also, when comparing credit cards watch out for deceiving introductory APRs. These low rates will only last a few months, it is the normal rate that you will be paying after that which you have to compare.

Grace period

The vast majority of card issuers provide a grace period before they charge interest on purchases in the time after they issue the monthly bill. If you have a grace period of 28 days you could get almost two months between making a purchase and the repayment becoming due. What is more, if you pay off your balance in full within the grace period each month you pay no interest at all. The grace period helps you manage cashflow and avoid interest fees so insist on at least the usual 28 days.

Credit card APR

If you intend to carry a running debt on your credit card you will want to familiarize yourself with how interest is charged on your card. Not all card issuers calculate interest and charges in the same way. They include: Adjusted balance, average daily balance, daily balance, ending balance, double billing and previous balance. The cheapest calculation method is the adjusted balance method but most issuers use the average daily balance method.

Fees and charges

When making a credit card comparison, fees and charges can make the difference between a great deal and a terrible deal. With the right choice of credit card and a bit of know how, you need never pay a cent. However, other cards will hit you with surprise charges such as annual fees and registration fees, and penalize you if you are late with payments or exceed your credit limit. Read the small print and be aware of all fees and charges before you fill out your credit card application.

Rewards

Many credit cards offer rewards for using your credit card, such as cash-back, discounts and free air miles. Rewards and privileges should not be the only factors you use to select a credit card for your needs.

Editorial by Richard at creditcardapr.com.sg.com.au

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In taking steps to clear off money owed on credit cards as soon as possible, people should find they have more cash to spend on purchasing items, it has been reported.

Claiming money owed on credit cards is “the devil’s debt”, Neil Faulkner writes in a lovemoney.com article that the less interest consumers have to pay on debt will free up disposable income.

One means of getting to grips with how much is owed, he states, is to seek out a 0% balance transfer credit card. Mr Faulkner revealed that by using this feature, borrowers can transfer a balance that is currently incurring interest charges to a new home that will prevent it from accumulating any further interest.

The lovemoney.com writer also claims creating a budget to ensure more than the minimal repayments are made can be helpful, with setting up a direct debit to take money out of an online bank account an effective way of doing this.

As an example of the difficulties just making the minimal monthly repayments on a card can cause, a debt of £5,000 where only the bare minimum is paid back will take more than 30 years to clear off and incur more than £5,000 in interest charges. However, by paying £200 off each month you will be debt free after 3 years.

In doing so, he asserts consumers should be able to avoid the problems that can be caused in missing a demand for payment. If just one repayment is missed, the competetive introductory rates that first made the account attractive, could be lost, as well as charges applied to the account.

Furthermore, a negative mark will be placed on a credit report, which could mean access to credit in the future could be a more difficult and expensive process.

Such claims come as Neil Munroe, external affairs director at Equifax, claimed that in the current financial climate people need to be as informed as possible when making an application for credit. Research by the firm showed requests for credit reports during the first quarter were up 9.6 per cent compared to the same period last year.

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For many people credit cards have provided a financial lifeline during the recent financially turbulent months, and many people have found that they have had to turn to their credit cards more and more in order to make ends meet when money it tight. Whilst credit cards can be very convenient and provide ease and speed for consumers they can also result in huge debt levels if they are not used and repaid properly, and therefore you need to be careful and cautious with regards to your credit card in order to make the most of your plastic.

The people that truly get the most out of their credit cards are those that tend to repay the balance in full each month, as by doing this you get to enjoy the increased ease, convenience, flexibility, and security that credit cards offer without being hit with hefty interest charges. In order to avoid interest charges on your credit card you should try and repay the balance in full each month or opt for a credit card that offers a longer interest free period on purchases if you need to spread the repayments for a larger or more expensive purchase.

You may find that you simply cannot repay your credit card in full each month due to your financial situation, and if this is the case you should at least try and pay more than the minimum amount requested by your provider. If you pay only the minimum repayment you will find that not only will you be paying huge sums of interest to the provider but also that the debt becomes increasingly difficult to clear and can in fact take many years to clear.

You also need to ensure that you carry out research and compare credit cards available from different providers, as this will help to ensure that the card you get is suitable and offers value for money. With so many cards to choose from and such a wide range of providers making comparisons is vital, but you can this quickly and easily via the Internet, which makes it easier to find the right card for you.

If you intend to repay your credit card balance in full each month then the APR on the card is not so much of an issue, as you will not be paying interest on the balance anyway. Instead, try and find a card that offers benefit such as cash back, travel rewards, discounts, and air miles, as you could then get back something from the card provider simply for using your card in the usual way, and the more you use your card the more you will receive by way of rewards.

When you have your credit cards you need to try and avoid withdrawing cash or making cash transactions, which can include online gambling, purchasing gift vouchers and cards, or paying bills on the card. This is because credit card firms charge high rates of interest and transactions fees for transactions such as these.

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Let’s get straight to the point. Credit card companies don’t want you to compare credit card interest rates. The way your provider makes money is by you getting used to using your card for spending, and they are hoping you will over extend and have to pay interest on the outstanding amount each month. But if you do compare credit cards with other providers, you can potentially save yourself thousands in interest over the space of the year.

You may not know that some credit card providers have a clause in their standard contract that states they can raise the amount of interest without warning if you miss a payment or even late in making payments? You may have previously had low interest on your credit card payments, but if you have missed or been late on a payment before, you could find your rate jump to over 20% overnight.

Obviously, if you have had this happen to you, the best thing to do is to transfer the outstanding amount for that account over to a new specialised balance transfer credit card account which can even have zero interest for the life of the transfer amount. What this means is that you can be paying 0% interest instead of the 20% or even more you might have been paying up until now.

This may not be the best strategy if you do a lot of everyday spending on your credit card though, as these types of cards are designed specifically to have high amounts of interest on further spending. And this is how the credit card provider will make money from you. If you need a card for buying groceries and other shopping there are some great rewards cards that have low interest for everyday spending often with quite a long interest free period after the initial spend and rewards associated with the amount you spend.

With any credit card you need to make sure you keep up with, at the very least, the minimum monthly repayment. If you use it regularly, it is recommended that you only spend what you already have in cash and can afford on the card, and pay this amount off fully each month. This way you still get the rewards, but you do not fall behind and begin paying interest.

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