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Best credit card deal

Q. How do I get the best credit card deal?

When considering a particular offer, make sure you know ALL the details of how your card will work. Be sure to study its terms and costs before signing on. Here are some key questions to ask.

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Does the card have an annual fee?
If you're looking for a no-frills, low-rate card offer, there's no reason to pay an annual fee. Avoid cards that charge them. Many rewards cards, such as the wildly popular air-mile credit cards, and some super high-end prestige cards charge annual fees in exchange for rewards or perks and services. Weigh these offers carefully.

What is the card's APR?
The lower the interest rate, the less money you'll pay when you carry a balance. Does the card come with a super-low introductory rate? How long does the teaser-rate last? Will you be able to pay off your card balance before the teaser rate expires?

Is the APR fixed or variable?
About 70 percent of all credit cards have variable rates. The interest rate on a variable-rate credit card fluctuates with an index. When the index shoots up, so does the card rate. When the index slips down, down goes the card rate. Be aware that the slide down happens much slower than the rate increase.

Some variable-rate card accounts are re-priced each month. Others are re-priced each quarter. Most issuers use The Wall Street Journal prime rate as an index. To check which way the major indexes are moving, check out this rate table.

Unlike variable-rate cards, the interest rate on a fixed-rate card does not fluctuate each month or each quarter. If you sign on for a card with a fixed 12.99 percent rate, there's a good chance you'll be paying 12.99 percent for quite awhile.

But it's important to realize that a fixed-rate card deal could change at any time. According to federal law, issuers must give written notice of rate increases to fixed-rate cardholders a mere 15 days before the new rate takes effect.

Does a variable-rate card offer have a floor?
Some variable-rate credit cards come with floors, also called minimum APRs. Once your card hits its floor, that's as low as it goes. Your interest rate won't drop any lower, regardless of future Fed cuts.

Twenty-four percent of variable-rate credit cards surveyed by have floors. Seventy-five percent of those cards had hit their minimum APRs as of October 2001. The only direction the rate on these cards can go is up. Be sure to check for a minimum APR before signing on for a variable-rate card offer.

How long is the card's grace period?
Most cards offer grace periods to customers who pay off their balances each month. A grace period is the period from the statement date to the payment-due date. If payment is made in full by the end of the grace period, no interest is charged. But if only a partial payment is made, interest kicks in at the end of the grace period.

Many issuers have whittled down the interest-free grace periods on credit cards from 25 days to 20. Some credit cards have no grace periods whatsoever. Avoid them.

What are the card's penalty policies?
While nobody plans on missing a credit card payment or going over the limit, it's important to realize what will happen if you do.

Penalty rates and fees are on the rise. Some card issuer's policies are quite severe -- as high as $35. Be sure to check. Pay careful attention to what will happen if you pay late during a card's introductory period. Will that super-low teaser rate disappear after one little mistake?

Found the card you want? Ready to transfer a balance? Before you do, check for fees.

Some cards charge you a fee for every balance you transfer to the card. Both First USA and Citibank charge a fee equal to 3 percent of the balance being transferred. First USA caps its fee at $35. Citibank's fee is capped at $50. It's best to avoid offers with hefty transfer fees.

Continue making minimum payments on your old card while waiting for a balance transfer to take effect, which could take four weeks. If you don't, your old issuer could slap you with a late fee. This worksheet will guide you through the balance transfer process.


-- Posted: Aug. 14, 2002




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