How to Find the Best Credit Card Rates
You might not realize it but comparison shopping for the best credit card rates
can dramatically affect your financial future. The combination of high credit
card interest rates and associated fees can cause you to have balances
so high, you could be paying the debt for years to come. Instead of spending your
money on rates and fees, think about what you could be using that money for and
use that as your motivation for comparing the best credit card rates.
How do you find the best credit card?
Fortunately, the Truth in Lending Law dictates that creditors must provide details
about their rates and other terms in writing. It is in your best interest to compare
more than one credit card agreement before making a choice. Many cards offer special
features such as frequent flier miles or bonus points. However, when you compare
credit card rates, the initially enticing features may lose their appeal
if the rate is too high. Be sure to read through the entire agreement and compare
credit card rates first, then the other terms, then the features.
How to compare credit card interest rates
Credit card interest rates are also known as annual percentage rates (APR). It’s
not enough to just look for the lowest APR; you also need to understand the differences
between the types. For example, the APR for cash advances and balance transfers
may be higher than the APR for purchases – for the same card. You may also find
credit cards that offer low rates to get you to sign, called introductory or delayed
APR, but then the rate is quite high when the introductory period ends. Compare
when the introductory rates end and what the higher rates will be when researching
the best credit card interest rates. Another type of APR is the
variable rate APR. These cards tack on a percentage on top of the Prime Rate (the
interest rate charged by the bank to their most creditworthy customers). Know what
the resulting rate will be. A tiered APR will charge varying rates for different
balance levels. You should also search the credit card agreement for a penalty APR,
which punishes you with an increased rate if you miss a payment.
Beware of the Universal Default Clause
The most dangerous APR is essentially a “hidden trap” for unsuspecting consumers
— the universal default clause. If you accept the terms of a card that has this
clause in the agreement, you are giving the credit card company the right to raise
your credit card interest rates significantly, even if you’re late paying an unrelated
bill, such as a store credit card or your electric bill. Giving the credit card
company this right can take what you thought was the best credit card
agreement and turn it into an open-ended drain on your bank account.
The consequences that you will literally pay for choosing the wrong credit card
can affect your financial future. Before you sign on the dotted line, look for the
type and amount of APR and all of the terms and conditions when comparing credit
card interest rates.