Knowing how a credit card works is important as this is the only way you can make the card work for you rather than the other way around. While making a choice on the right credit card to pick, you should consider the following attributes before deciding. Annual Percentage Rate Not every credit card is equal as proven by the wide range of annual percentage rates (APR) available in the credit card market. As the APR is the interest rate charged to you on top of your credit card charges, greater delays in your payment will result in higher interest rate charges. Thus, it is important to always clear all your outstanding balances as soon as possible. Allowing the balance to snowball will not be wise as your outstanding balance may one day grow to a value that may be difficult for you to eradicate. Grace period The grace period is a period of time within a billing cycle where no interest rates are applicable to your credit card charges. Cards with no grace periods charge you daily interests commencing from the day you make a purchase with your credit card. The interest rate accumulates as the days go by until you pay off your outstanding balance. Other cards may provide you with a grace period (usually within a month) to pay off your charges before interest rates are applied. Fees Apart from the APR, there are also multiple miscellaneous fees that will be charged to your account when you use your credit card. Usually, a card with a low APR may incorporate higher annual fee charges and vice versa. The trick is to know which package allows you get the best value out of your card. For instance, if you are punctual with your payments then getting a high APR card with low annual fees would be a good idea. This way, you will not be affected by the APR when you clear all your outstanding balances within the grace period and you will not lose out on high annual fees for using the card. Rewards Due to the high competition between credit card providers, most credit cards come with reward programs to ensure customer loyalty. Some credit cards allow users to gain a percentage of their cash back based on the special purchases they have made with the cards. Other programs award flight miles, providing credit card users a chance to claim a free air ticket to pre-selected destinations |
