How to Choose the Best Credit Card Applications
Posted 06/17/09
When your credit rating is good, credit card companies stuff your mailbox with credit card applications. Consumers with especially good credit can get several offers a day, every day. With so many offers to choose from, how do you decide which offer is right for you?Start by ignoring most of the promotional offers. Those 0 percent interest rates are good only for an introductory period; after six months or so, they shoot up to the real interest rate, which is usually in the double digits. Check the small print or the deliberately boring chart on the back of your credit card applications for the real interest rate. Sort your offers by interest rate, and give serious consideration only to the offers with low regular interest rates.
The one exception is promotional offers in which you are invited to roll over debt from another credit card, and the low interest rate will apply to the transferred amount for as long as it takes you to pay the loan off. If you have a large balance to transfer off another credit card, and you do not plan to charge any purchases to the card after you have transferred the balance, then this kind of promotional offer can be an excellent way to get a low interest rate on a large outstanding balance. However, any charges you make to the card after the introductory period have a much higher interest rate, and any payments you make to the credit card company are applied to your lowest interest rate balances first. You might not be able to start paying off the higher interest charges for months or years, during which they will accrue a healthy sum of interest for the credit card company. Consider this kind of promotion only if you need to roll a large balance onto a card with a lower interest rate, not if you are looking for a credit card to use on a regular basis.
When you have a selection of credit card applications with attractively low rates, consider their default rate. This is the interest rate you will be charged if you are late with a payment, exceed your credit limit, go into default, or commit a host of other credit sins. It can be ridiculously easy to trigger the default rate, so even if you are a punctual bill payer, give careful thought to the cards' default rate. Choose the lowest you can find.
When you have a selection of credit card applications with excellent regular and default rates, now is the time to consider all the promotional offers and extra goodies the companies are offering. You can get some fantastic perks from companies that are eager for your business. Then fill out the credit card application for the best card, drop it in the mail, and use your new credit card with confidence.
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