Credit Cards

Factors to Consider When Selecting a Personal Credit Card

By Jack Chevalier

Selecting a credit card is much easier today than ever. Just about every financial company offers unsecured credit cards. In selecting a credit card, there are some tips that consumers should use when selecting credit cards.

1. Interest Rates:
Many cards now have introductory 0% offers on balance transfers. Conversely, some cards will give you 0% on your purchases for an initial period, usually from six months to a year. And best of all, there are quite a few cards that offer 0% on both balance transfers and purchases, which is the ultimate in 0% deals!

Another thing to watch out for is monthly interest rates. '1.5% a month' may not sound a lot, but it compounds up to 19.6% APR. (Because of interest being charged on interest and so on, the annual rate is always more than simply twelve times the monthly rate.) Always check the APR (Annual Percentage Rate), which is a basic - but not perfect guide - to interest rates.

2. Credit limit:
You should also consider the level of credit that is being offered when selecting a credit card. A credit limit is the amount of money that is available for purchases, cash advances, balance transfers, fees and finance charges. Credit limits can start as low as $200 for department store credit cards and go into the thousands for major credit cards (Visa and MasterCard) depending on your credit rating and income.

3. Insurance
Several major credit-card issuers offer free insurance on goods bought using their card. These include:
- Price protection
- Purchase protection
- Travel accident insurance
- Online fraud guarantees and Internet delivery protection

4. Secured versus unsecured cards:
Another factor to consider when selecting a credit card is whether the card is secured or unsecured. Users of secured credit cards pay a deposit to obtain credit. These offers often appeal to two classes of individuals, those who are very young and are having a difficult time establishing credit and those who have blemishes on their credit reports that prevent them from obtaining unsecured credit. The credit limit for secured credit cards is usually determined by the amount of your deposit.
Unsecured credit cards are by far the most widely held cards and tend to have higher credit limits.

5. Cash Withdrawals:
Drawing out cash on a credit card is a complete no-no. Firstly, you start paying interest at sky-high standard rates from the moment that you withdraw your cash until every last penny of your bill is paid off, including interest. Secondly, credit-card issuers charge steep fees if you use your card to withdraw cash at a cash machine or over the counter. Expect to pay a charge of around 2% (minimum %A32) per withdrawal. Hence, making lots of small cash withdrawals on a credit card is hugely expensive, so stick to your debit card!

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