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Debt Advice: Why its Important to Shop For Credit Cards
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by: stickystebee
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Word Count: 407
Credit cards, especially bank-issued credit cards, are an important part of the bank card system. Your local bank may display its name on your card, but chances are good that your card was actually issued by a behind-the-scenes lender. Banks are in the business of trading with banks, and they exchange favours and exercise reciprocity regularly. Smaller banks act as agents for larger banks in the issuance of credit cards and providing card-related services. Card processing centers handle administration and collection for a large number of smaller banks. For the larger banks, this subsidizes overhead. For the small banks, it literally keeps them in the game. So before you choose your card, do some comparison shopping.
What are some of your options when shopping for cards? Making a spreadsheet with the following items on it will help you to compare your choices: Transaction Fees, Annual Membership Fees, Intro APR, Final APR, Change date of APR, Cash Advance Rate, Bank of Issue, Restrictions on Card Use. These headings more or less summarize features all cards share. Since many cardholders pay their balance off each month, banks have to come up with ways to increase their revenues off card usage -- hence, Transaction Fees. Often these are balanced with Annual Membership Fees. Some cards have none, and no Annual Fee. However, these may have higher interest rates, so it is important to build your spreadsheet for every card to see where they are making their money.
By far the most important categories in this table are the columns on APR. APR stands for Annual Percentage Rate, and these rates will vary considerably. Most countries have legal limits on how high these rates can go, called "caps" or "ceilings". Intro APR is used as an enticement. Often at a very low rate, Intro APR is offered in connection with balance transfers to entice customers into transferring balances off higher rate cards to the new card. These rates usually are locked in for three to six months, at the end of which time they will go to the card's regular rate. In short, within a year you could be paying more interest than you did before you transferred your balance, so be careful with your debt management.
Shopping for cards is serious business, and banks know it. They design the cards to attract customers, but must make their money somehow, so be on guard for the hidden agenda.
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In short, within a year you could be paying more interest than you did before you transferred your balance, so be careful with your debt management.
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