From the number of proposals in the market is dizzying. Even one bank has several types of credit cards and conditions on them, and there are dozens of such banks. In this article, let’s understand the main points you need to pay attention to.
A credit card is an executed loan agreement with a bank. It has essential conditions – the loan amount (or credit limit), the period of use without interest, the interest rate, the term of the loan. On the one hand, these parameters are easy enough to compare. But it’s not that simple, because there are many more options, such as service charges, the ability to accumulate bonuses, cash withdrawal fees, a list of banks where you can get cash without fees, etc. Even the annual card maintenance can be organized differently: the fee can be charged once a year or monthly, the first year can be free in service, and the subsequent years will be charged a fee.
Below we’ll take a closer look at exactly what to look for when choosing a credit card.
One of the main characteristics of the card is how much, in fact, money the bank is willing to lend you for use.
The limit is determined individually, based on each individual borrower’s ability to pay. The higher the income, the higher the proposed loan limit.
If the limit is too high, there is a risk of losing control over your expenses and getting into debt. You should keep a close eye on your expenses and pay your debts on time to make sure that doesn’t happen.
This is essentially the cost of credit, which is the money you have to pay to use the bank’s money. Typically, the interest rate on a card is higher than on a personal or consumer loan. This is a kind of convenience fee: after all, the money on a credit card is always at hand, and you can use it at any time.
It would seem that the lower the interest rate, the better for the client: after all, he has to pay less. But it is not that simple.
Low interest rates often mean that the cost of issuing or servicing the card is high, so the interest rate is not the only thing you should look at when choosing a credit card. Although, of course, it is one of the main characteristics of this product.
This is the most interesting feature of credit cards, which allows you to use them as efficiently as possible.
This is a period of time during which you can use the borrowed funds for free. The bank starts charging interest only when the grace period is over.
Experts urge not to abuse the grace period. In general, the golden rule of using a credit card is as follows: don’t spend money you don’t have.
Note also that even during the grace period the bank will expect you to make minimum payments. If a person has proved to be a reliable debtor, these payments can be waived.
Fees and other payments
Let’s find out what else the bank may charge you for. The commissions listed below are the most common:
- Card service fees
- Cash withdrawal fees
- For transfers
The credit card is designed to be used in stores. Other operations make the banks suspicious. That is why some impose additional interest on credit card transfers.
Bonuses and loyalty programs
Banks now can not offer any radically new or super-beneficial terms on credit cards. And the fight for the client only intensifies. However, the average person benefits from it, because it forces banks to make interesting offers.
One of them is cashback. You pay for a purchase with your credit card and get a part of it back, at least a small part. As a rule, banks offer cards with cashback on certain categories of goods. For example, you get money back for airline tickets.
Another cashback option is for purchases at partner stores. The bank has contracts with retail chains, in which they “exchange” customers.
Tips from experts
Understand which credit card is more profitable, you can only assess the totality of credit terms. For example, the grace period for interest-free use of money in one bank may be much longer than in another, which, at first glance, is beneficial to the client. But at the same time the interest rate will be higher or there will be some other associated unobvious payments. Therefore, the most important thing when deciding to apply for a credit card is to have a complete list of all credit terms.