Before You Accept a New Credit Card ..

Before You Accept a New Credit Card ..

It's becoming difficult to survive today without a credit card – or at least a debit card with a credit card logo. Travel arrangements, restaurant reservations, online business transactions and placing orders by telephone all require the use of a credit card. Here are some things to consider before signing your name to a new credit card application,

Avoid Too Many Cards
There is no good reason for a person to have a wallet overflowing with multiple credit cards. You only need one or two credit cards. Be selected and choose cards that will work best for you and pay them back. Too much credit availablity can lead to bad financial decisions and then unmanageable debts.

Take a good look at your expenditure habits
Just because you have four credit cards offered in your mailbox every day does not mean you can afford to. In fact, credit card companies tend to target individuals who are most likely to build up big balances because they'll make the most interest off you.

Don't Fall For Promotional Rates
Many credit cards do their best to entice new customers through promotional rates. These are typically lower than average interest rates on new purchases or balance transfers that apply for a limited time. But then once that time is up, the interest rate rockets. These are also cards that often send your interest rate skyward if you make a payment late. The permanent interest rate on a credit card is much more important than the temporary promotional offer you get; unless you are using the card to pay off a higher interest account or will have the balance completely paid in full before the promotion ends.

Look for More Than the Interest Rate
While the interest rate is an important consideration before accepting a new card, it's not the only thing that matters. The interest rate actually only matters if you carry a balance from one month to the next, because if you pay the balance off in full within the stated period, there is no interest charged. Also, when you make a decision for a credit card based solely on the interest rate, you might be very disappointed when the interest rate climbs up a few months after you get the card. Even the fixed rate interest cards can differ their interest rates.

How the Credit Card Billing Cycle works
Knowing the cards billing method is important. Will the interest be applied to your purchases from the day you use the card, or is there a grace period available? How many days do you have between billing cycles to pay off the balance before interest is formed? Know exactly how long this grace period is because your lender is likely to mail the bill out late in the billing period, giving you just a couple days in which you can get your payment out before it falls outside that grace period.

Study Late Payment Charges and Penalties
Read the credit card terms carefully to understand how late payment charges and penalties are added to your account if you made a payment late. See if a late payment will also cause an interest rate hike. Most credit cards apply the late payments and penalties to the card balance, and therefore you end up paying interest on these if you don't pay the balance of your card off in full before the end of the billing cycle.