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Credit cards are a financial tool that can offer many benefits. It lets you spend money in advance directly from your card and pay it back to your provider later. You don’t have to worry about running out of money, and you can avoid all the hassle with ATMs and cash. However, credit cards are often tied up to interest rates and charges just like other normal loans. That’s why it’s so important to compare credit cards before choosing, so you end up with the deal that serves your purposes the best.
Here is a three step guide on how to compare credit card deals:
The credit card compare process can be tough as there are literally hundreds of different options out there. The first step to finding a credit card that suits you is to be conscious of what you need. Everyone’s financial situation is different. No one can tell you what card is best for you, but you can ask yourself a few questions to come closer to an answer:
The best credit card deals for you depend on how much you plan to pay back each month, because it has an influence on what kind of interest and fees you should be looking out for. Someone who plans to only pay back the minimum repayments each month would benefit from other card deals than someone who plans to always repay the full amount due
Credit cards are usually not a good idea as a tool to pay off existing debt. Unpaid credit breeds more interest, and interest makes debt grow. Not only can the costs spiral out of control; you can also potentially damage your credit history, which would make it harder for you to get credit or loans in the future. Providers could for example decrease your credit card limit as a result. A credit card limit is the amount of credit that you can spend in a given time period.
Someone who is just going to use it as an extra security might want a different deal than someone who needs it for the credit or perks. And if you want to build positive credit history, you might want to look for something different than if you for example want a more expensive card with insurance or discounts.
Like other types of loans, some deals are better than others for different people. Choose the card that fits your lifestyle and needs best. It can be really difficult to know what to look for, but in the end it all comes down to three things: Fees, interest and perks.
There are a lot of different types of fees and interest on the credit card market. Obviously, low interests and fewer fees are always desirable but it’s not always as simple as that. You can benefit from a higher interest, if the card includes features you personally need. Here is how to find the best credit card deals based on interests and fees:
It can be a good idea to compare credit cards based on the interest rate. Remember that by law, providers can charge a maximum of 48% in interest a year including all fixed fees. However, not all providers fall under this law. Banks, building societies and credit unions for example don’t have any cap on how much interest they can charge their customers a year.
Customers who know they can pay back all their bills within the time limit can benefit from choosing a credit card with an interest free period. If the amount is paid back within the time limit, no interest is paid. For customers who know they need to pay back the credit later, it often saves more money to choose a card with low interest rates instead.
Another thing that can help you find the best credit card deals is minimum repayments. Most people are unable to pay back all their credit each month and so will only pay back the minimum repayments set by the provider. It’s cheaper to pay as much of the amount as you can, but often that is not realistic. Check how much interest you have to pay for the amount that you know you can pay back each month. If you know that you can pay back $300 out of $1000 each month, you can then compare how much debt you would be building up with each of the different providers.
Notice that some of the perks of your chosen credit card may not apply to you, if you are transferring outstanding balance from another card. You can often get a lower interest rate for some time if you do so but may not be eligible for other benefits such as interest-free periods until the balance transfer amount has been paid.
If you don’t like the idea of interest and potential growing debt at all, there are other possibilities out there. A debit card or a secured or prepaid credit card is usually better for people who are looking to improve their finances. However, debit cards and prepaid cards aren’t the cure-all. Using a prepaid debit card may involve more fees than a normal credit card. It’s up to you to decide if these fees outweigh the risk of spending more than they can pay back.
Unlike secured credit cards, the law doesn’t require prepaid debit card providers to clearly disclose fees. Always make sure to read the fine print before signing up for anything.
Many credit card fees and charges are very similar. Most providers will for example charge around 2% of each cash advance. Other charges can vary, so be conscious of which one of them you might have to pay.
Some of the fees you can compare between are foreign transaction fees, over-limit fees and missed payment fees. Also take a look at start-up fees and annual fees. Sometimes, you can save money on annual fees if you choose a card with fewer features. The more perks, bonuses and features a card offers, the higher the annual fee will usually be.
One way to save money on annual fees is to combine two credit cards in one. Another way is to look for your desired perks somewhere else, whether it is discounted goods or insurance. Sometimes extra features in a card are worth it, if you really use it.
A lot of cards offer perks such as bonuses, discounts, cashback and other reward schemes. Let’s look at some of the different reward schemes you might encounter when comparing credit cards:
Cashback credit cards give you back a percentage of the credit spent. Like other reward schemes, it incentivises you to use your card more for more benefits. Other types of reward schemes include bonuses where the provider lets you collect points per dollar spent that can then be converted to gift cards. Some cards allow you to collect travel points, so you can fly cheaper. Others again offer discounts if you use the card in one or more of their partner organisations. Some providers offer the first 12 months without interest or so called Honeymoon interest rates.
Perks like these sell well because they offer an obvious advantage. Just remember that credit card providers need to make their money somewhere. It’s up to you to find out where that “somewhere” is in a particular deal. Choosing a card solely because of its perks can be risky. Often cards with great reward schemes will have a higher interest rate or annual charges that outweigh the money you would save.
Once you know what you need, you should be able to compare credit cards and find the best credit card deals for you. Think about these three steps to choosing your card wisely so you can get a great financial tool in your pocket instead of an unexpected burden. There are many different parameters that you can look at when comparing credit cards. The best way is to take a close look at the different kinds of interests and charges and decide which deal could save you more money. Secondarily, you can look at the bonuses and reward schemes, knowing that perks don’t always outweigh a low interest and low charges. The best credit card deals for you are the ones that fit your lifestyle and financial situation.
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