How to Select the Best Credit Card
Nowadays, credit cards are offered by many issuers that use numerous tricks and offers to attract new customers - zero percent interest for certain transferred balances, lower financing rates, a number of rewards and bonuses, etc. For this reason, there are important issues to keep in mind when choosing a credit card
Step 1 - Check Accompanying Fees
For personal credit cards, the most important factor is the accompanying fees. They could be annual or membership fee, closure fee (for closing the account), over-the-limit and late fees.
The over-the-limit fee is charged when the purchases, together with any fees, exceed the amount of available credit. The late fee is charged for past due payments. Some institutions charge late fee on the day that follows the payment due date.
Step 2 – Consider the Annual Percentage Rate
Another significant factor to consider is the annual (yearly) percentage rate that is applied to outstanding balances. Low rates are naturally preferable since the client has to pay less when using the credit card. One single card could apply different annual percentage rates for transfers, cash advances, and purchasing.
Step 3 – Check the Credit Limit
The credit limit
of the card is another factor that may influence the decision while choosing among offers. This is the sum available for purchase, cash, balance transfers
, and fees. Credit limits could range from 200 CAD for department store credit cards
to several thousands for Visa
depending on the individual income and credit rating
Step 4 – Choose between Secured and Unsecured Credit Cards
The credit card could be, in general, secured or unsecured. Holders of secured credit cards
pay a deposit prior to obtaining credit. The credit limit, therefore, depends on the amount of the deposit. Unsecured credit cards
have higher credit limits and are more popular. However, issuing institutions are often unwilling to issue unsecured credit cards to individuals with no or poor credit history
. They may apply for a secured credit card
and request that the bank upgrade it after making regular payments
for one year.
Step 5 – Look at Bonuses that Come with Cards
The final means for attracting new clients and, of course, for rewarding loyal customers, are perks and rewards: cashback bonuses
for travel, department stores, utilities, restaurants, etc. Bear in mind that although appealing, these perks have to be the last thing to consider when making a choice - the highest rewards go to the biggest spenders. Besides, if you aren’t a frequent traveler, you don’t need air miles that will suffice to travel around the word a couple of times.
Step 6 – Consider the Grace Period
Last but not least, one has to take into consideration the grace period provided for the full repayment of the credit card balance (there should be no increase in the interest charges). Credit cards usually have a grace period of more than 25 days. This grace period is however not applicable to cash advances and transfers.
Business Credit Cards for Small Businesses
Apart from personal credit cards, there are also business credit cards, suitable for small business
owners. For example, business credit cards with rewards programmes are not appropriate for carrying a month to month balance. The savings made will be counterbalanced by imposed interest charges. So, the three key points in the selection of the best business credit card should be as follows: use only for business and not for personal purposes, the maintenance of all statements for tax payment by the end of the fiscal year and of course, interest rates as low as possible to cut down on expenses.