Ramsey County

Making $ense of Dollars and Cents

May 4, 2009

Matching a Credit Card to Your Life

          “How much is the interest rate?” is the first question most people think of when it comes to credit cards.  But if you are applying for a new credit card or thinking of changing to another card carrier, there are other factors that come into play.  A credit card that is well matched to your financial needs can be an excellent financial tool while a poor match can cost you hundreds of dollars.

          Type of card - Secured cards require a security deposit and are for those who have no credit or bad credit. Regular credit cards do not require a security deposit but have few features.  Premium cards (gold, platinum, titanium) offer the highest credit limits and usually have extra features such as travel insurance or emergency service. –

          Member benefits - Benefits vary from card to card. Some offer travel protection. Others offer roadside assistance. These benefits can be useful if they match your lifestyle. Weigh the pros and cons of its benefits. For instance, if you don't travel often, you may not want to go with a card that has travel benefits. 
           Calculating Charges   Credit card companies use various methods to calculate your outstanding balance, and the method can make a big difference in the finance charge. Your outstanding balance may be calculated over one or two billing cycles. It may or may not include new purchases in the balance and may use the average daily balance on your card or the previous balance. Some cards have a minimum finance charge for each month whether or not you have a balance due.

          Fees - Surprise or hidden fees are one of the areas that generate the most complaints about credit cards.  Does your card have annual fees, over-the-limit fees, late payment fees, foreign transaction fees, balance transfer fees and more?

          Cash advance features – The interest rate for cash advances on your credit card is usually much higher than the interest rate on regular purchases. If you plan to use your card for cash advances, look for information about which ATM system you have access to, interest rate on cash advances and daily limits on cash advances.

          Credit limit - The limit on your card is determined by your credit history, but some cards arrive with a preset credit limit. Is the credit limit high enough for you to make the type of purchases you are considering?  Low enough to not be tempting to overcharge?

          Interest rate – If you are one of the few Americans who pay off their entire credit card balance each month, the interest rate on your card is of little importance to you.  But if like most card holders, you carry a balance and so pay interest on that balance each month, a low interest rate can save you hundreds of dollars.  Also a credit card can have different interest rates for different charges and circumstances.  You may receive a low introductory interest rate for signing up with a particular credit card, but how long is that rate in effect?  And what is the projected new rate? Does your interest rate change after three, two or even one late payment?  If you are transferring a balance from another credit card, what interest rate applies to the amount transferred?

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524 4th Ave NE #5, 2nd Floor Ramsey County Courthouse
Devils Lake  ND  58301
701-662-7027
email - NDSU.Ramsey.Extension@ndsu.edu