Credit Card Glossary
Questions You Should Ask Yourself About Credit
Here are some questions you should ask yourself before you choose a credit card.
1. Will you be paying off your balance off in full every month or do you intend to carry a balance every month and pay the entire debt off gradually. If you are paying off your entire balance every month the interest rate is not as relevant as you will be paying before the grace period (usually about 25 days) is up and you will not be accruing interest. On the other hand if you intend to carry a balance the lowest interest rate is in your best financial interest simply as it will lower the amount of your monthly payments as well as how much borrowing with this credit product will cost you over the long term.
2. Is your interest rate fixed or variable and if it is variable to what index is it tied? Some indexes have higher or more fluctuating rates than others.
3. If you are considering a pre-approved credit card with a teaser rate are you familiar with the conditions that could suddenly cause you to lose the low interest offer? Also do you know what your interest rate will be once the low introductory period has lapsed and is the renewed rate less then what you are paying on your current credit card balance or more?
4. Does your credit card have an annual fee and if it does just exactly what are you paying for in return. Are you getting your money’s worth? Generally the lower the interest rate is on the credit card, the more likely it is also to have an annual fee.
5. How is the minimum monthly payment calculated? Keep in mind that an adjusted balance is the friendliest calculation for a credit card user.
6. If you are transferring balances from other credit cards to your new card what are your conditions and fees for doing so?
7. In addition to the annual fee, what other penalties and fees are connected with using the card?