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SHOPPING FOR CHANGE CARDS

Published by sam - 18/09/07 - 10:09:27 am

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When shopping for charge cards, you should weigh several factors:

Interest rate    The finance charges should be you be your first consideration. To get the best rate, shop around by telephone to compare rates in your area.  Keep alert for articles in newspaper and personal finance publications that list especially low rates.  Some estate banking authorities and consumer organizations periodically survey credit card rates.

Annual rate      Most, though not all, banks that issue credit cards levy an annual fee, as do the major T & E companies.  Department store and oil company charge cards usually cost nothing but have, of course, very limited acceptance.

Some cards advertised as free, however, are in fact not free at all.  Although they make no annual charge, some levy a prepayment fee on accounts that are paid in full each month and some charge the cardholder $1.50 for each month in which the card is used—in short, an $18 annual fee collected in installments. Credit cards that carry low fees or none at all may—and often do—charge very high interest rates unpaid balances.  When, for example, the Missouri legislature prohibited an annual fee for credit cards, the issuing banks immediately raised their interest.  Although interest rates need not concern you (assuming you have a 30-day grace period) if you intend to pay your account in full, other features of a card need to be intend to pay your account in full, other features of a card need to be considered before you sign up for the card that has the least expensive annual fee.

Acceptance    Charge cards have no value if merchants refuse to accept them.  Both MasterCard and Visa are the most widely accepted, not only in the United States but also abroad.  Some restaurants accept only American Express cards.  Discover is accepted at roughly one fourth the number of locations that accept MasterCard and Visa.

Grace Periods  Another factor to consider is the card’s grace period.  Some cards—most commonly those issued by credit unions—provide no grace period but begin calculating interest on all charges as soon as they appear on the statement, as in the case of cash advances.  Other card issuers allow 30 days after purchase before interest charges begin to accrue.  The difference card can add up A 30 day grace period could save you in $7.50 in interest on a $500 purchase, assuming an 18 percent annual interest rate.

Cash Advances   As automated teller machine and regional or nationwide ATM networks have proliferated, the availability of instant cash has become a recurrent theme in charge card advertising.  The advertisements point out that a cardholder can get cash just by inserting his or her charged card in an authorized automated teller machine.  Many cardholders think these cash advances enjoy the same grace period as their ordinary charges.  In fact, interest the moment you receive the cash advance, whether or not you pay your account in full during the grace period.

Fringe Benefits    In their competition for cardholders, some issuers of charge cards offer a number of minor benefits for example, flight insurance coverage for cardholders who charge their tickets to their card, collision coverage on rental cars, discounts on travel charges that exceed a specified amount, discounts on long distance telephone calls, or registrations for all your charge cards so that you can report their loss with a single telephone calls.  Some banks that issue credit cards will automatically deduct your full payment from your checking account on its due date; others will accept payment by telephone—practices that eliminate the need for you to write and mail checks.  For most cardholders, however, those benefits less important financially than a lower annual fee or a lower interest.

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