4 Most Important Credit Card FeaturesSeptember 14, 2010 - 8:55 am
Whenever you apply for a credit cards, no matter which type of credit card it is, you should always look at certain features. These features are most important for keeping your credit card cost at a minimum.
The Interest Rate
A credit card’s interest rate is usually the single most important feature. That’s because it influences how much you pay for carrying a balance on your credit card. If you pay your credit card balance in full every month, the credit card interest rate won’t matter so much. But, for everyone else, interest rate is critical. The higher your interest rate, also known as your annual percentage rate or APR, the higher your monthly finance charges will be. If you plan on carrying a balance on your credit card – at least some of the time – look for a credit card that has a low interest rate. You’ll pay lower finance charges.
The Annual Fee
In the credit crunch, more credit card issuers have started charging an annual fee. This is a yearly cost you pay simply for the convenience of having the credit card. There are times when an annual fee is worth it. For example, if you have a rewards credit card, you can expect to pay an annual fee. Just make sure you’ll accumulate enough rewards to outweigh the annual fee. Secured credit cards, aimed at people with bad credit or no credit, also charge an annual fee. Avoid paying an annual fee on a plain-vanilla, no-frills credit card. There are too many of those on the market that don’t charge any annual fee.
The grace period is the amount of time you have to pay your balance in full and avoid a finance charge. Longer grace periods are better because they give you more time to pay off your credit card balance. These days, grace periods range from 20 to 25 days. Be aware that certain types of balances don’t have a grace period. Most often cash advances and balance transfers won’t have a grace period. Instead, these balances begin to accrue interest immediately. If you started the billing cycle with a credit card balance, new purchases sometimes don’t get a grace period, depending on the credit card issuer.
Some cardholders will argue that rewards are the most important credit card feature. Of course, these are the customers that actually qualify for reward programs, something that’s difficult to do these days. Credit card rewards come in the form of cash, points, and miles. Cash is self-explanatory – you can receive a credit to your account or a check for the rewards you’ve accumulated. Points can be redeemed for merchandise and services from certain providers who work with your credit card issuer. Miles are redeemed for flights and hotel stays. When you’re evaluating a credit card rewards program look for one that lets you earn the most reward for your dollar. You should also pay attention to minimum and maximum redemption levels, expiration dates on your rewards, and maximum accumulation amounts.