How to Choose the Best Credit Card

Consumers who want to maximize their options on a credit card should first find out all the terms and related costs associated with a particular card before applying for it. For those who feel that the best credit card is one that is low-rate and no-frills, they should determine if the card has annual charges, since there is no reason for no-frills users to pay such fees. Some upscale prestige cards, air-mile credit cards and similar rewards packages collect annual fees in exchange for perks, services and other rewards.

The definition of a best credit card varies depending on personal preference. Individuals currently have many options available in the market, including instant approval cards, cash back credit cards, low-interest credit cards and prepaid debit cards.

Adjustable Rate or Fixed Rate?

The percentage rate (APR) is another crucial element users must weigh before signing up for what they feel is the best credit card in the market, particularly those with balances, as lower interest rates mean lower finance charges and substantial savings.

For fixed-rate cards, owners can expect interest rates to be more stable.  A credit card on 12.99% interest is likely to remain at that level for a relatively longer period of time compared to an adjustable rate card. However, consumers focused on securing the best credit card should be aware that even fixed-rate terms could change, although card companies are required by law to issue a written notice for any rate adjustment at least 15 days prior to their effective date.

Minimum Rates

Variable-card customers need to know if their plans feature minimum APRs, or ‘floors’ – the lowest-possible levels that interest rates could fall to, inclusive of any adjustment by the US Federal Reserve. A Bankrate.com poll indicated floors for 24% of variable-rate issuers surveyed, with 75% of that group already at minimum APRs through October 2001. This means that the interest rate on these cards will only go up in the future, but not go below the floor rate.

Grace Period

How long or short a grace period is for paying balances is another factor that customers seeking the best credit card should consider. Since interest charges kick in when the grace period lapses, a company offering longer grace periods means a more extended time for users to make their payments without incurring interest before their next card purchases are penalized.

Penalty Fees

Individuals seeking the best credit card deal should also be aware of all penalty policies covering missed payments, purchases exceeding the limit or balance transfers. First USA and other providers have a $35 ceiling for such transfers, while Citibank has a $50 cap, so checking it out is a good idea. Since choosing the best credit cards is subjective, it's important for you to have all the required information available to review and compare before making your decision.

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