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Here are a few things you may wish to consider if you are looking to obtain a new account:
- Interest rates - Interest rates vary dramatically from card to card; the lowest rates tend to be reserved for those with a good credit history. That doesn’t mean that you cannot apply for a low-interest card if your credit history is spotty; it just means you may not get it. Keep in mind that while advertised interest rates can be fixed or variable, the credit card companies may, by law, raise interest rates at any time and they may do so for any reason. They need only provide you with two weeks’ notice.
- Secured credit card - If you have little or no credit, you may have to select a secured credit card, which requires a cash deposit.
- Grace period - Does the account give you a grace period (usually 25 days or so) before applying interest to a purchase? Some do not, and interest accrues right away.
- Universal default clause - Will the company raise your interest rate if you pay some other bill late? With about one third of companies, paying any bill late can result in an increase in the interest rate.
- Penalty fees and default rate - Check to see how much you will be penalized if you pay late, and how high the interest rate can go if you do. That low interest rate could go away in a hurry if you make a late payment.
- Rewards - Some cards offer cash back, frequent flier miles, discounts on merchandise, and more. The interest rates on these accounts tend to be higher than for cards that do not offer rewards. If you don’t pay your bill in full every month, these rewards could cost you more than they are worth. In the case of frequent flier miles, they sometimes expire. If you have spent thousands of dollars to obtain frequent flier miles, will you be able to use them?
There are various Websites that allow you to compare credit cards according to various criteria. By visiting one of those sites, you can whittle down the list of cards that may be of interest to you. Each person will have to look at his or her specific needs to determine which card might be right for them. A card that helps you get discount tickets to Milwaukee Brewers games won’t do you any good if you live in Miami and rarely, if ever, visit Milwaukee. For most people, finding one with a good interest rate and a suitable grace period is a good start.
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