All credit cards work on the same basic principle, you spend money that you do not have in your account and you pay that money back later. This spending is charged with some percentage of interest that is generally same for lenders. Though these credit cards do differ in some other features that may include different promotional values, occasional low-interest rate, interest holiday, other rewards, etc.
You should keep in mind these features to make the right choice of credit card for you. You can compare different credit cards based on the following features to decide the right one for you.
Types or Version of Credit Cards:
To get started let us first understand the types of credit cards available to you. You can have any of these credit cards depending on your need or have multiple version of same credit card.
- Vanilla Card: it is the basic credit card available to any borrower. A standard vanilla card does not come with any benefits or rewards but it charges a low rate of interest. The low rate of interest is the attraction for many borrowers to opt for a standard vanilla card.
- Balance Transfer Credit Card: these cards allow the transfer of balance on a low-interest rate or a fee.
- Reward Card: These cards get you rewards in different forms on purchases made on the reward card. These rewards range from cash rewards, discounts, points, etc. you can also convert these rewards in exchange for cash.
- Premium Card: These cards give you higher rewards and benefits for your spending. It does charge a higher interest rate as well.
- Retail Card: A retail card is the one that is specified to a store. Using these cards with the stores offer rewards. Retail cards also have co-branded versions that include Visa and Master card that are used globally.
- Secured Credit Card: If you have a bad credit score you might not qualify for a credit card. But you still may have a secured credit card. These credit cards have a secure backup deposit against the credit limit it offers.
- Charge Cards: You can pay your balance in monthly minimum installments through a charge card instead of paying the whole amount.
The next important things to consider for a credit card is its credit limit, the Annual Percentage Rate and the Grace period, and the credit card fee. These all are explained below.
Credit limits: The credit limit is the maximum amount of money that you can borrow using your credit card. It depends upon your annual income the more your income is the higher credit limit you can opt for. A card with about a credit limit of $500 is the lowest one available on an average annual income of $15000 to start with. Platinum or black credit cards’ credit limit is much more than the basic ones. You can borrow up to a hundred thousand dollars with these top tier cards. The spending is not a set of A decided figure instead it may change from month to month.
Some credit cards, also may not have a credit limit but it allows you to spend taking into consideration your income, credit score, spending, etc. credit cards may also be used for the transfer of amount. Credit cards allow you to spend 70% of your credit limit as credit transfers. You may also get another credit card for your employee or your family member and it will share the same account credit limit with your credit card.
Annual Percentage Rate ARP: the annual percentage rate, or APR, is the interest rate applied to your balance past the grace period. For different types of balance, you have different ARPs. You will have a different percentage for the balance of the transfer amount and a different rate for the purchases you make using those credit cards.
You may have to pay a higher rate in case you are late with your payments to a creditor. In case your card has a universal default clause late payment will make you a defaulter to multiple creditors and you will face a higher rate with all those creditors.
Your ARP may be fixed or flexible and may change upon revision in terms of the agreement. A variable ARP is generally guided by the index rate.
Grace Period: it is the period you have before the interest rate is charged on the balance you owe. During the grace period, no interest is charged on the balance. Similarly, when your balance does not have any grace period it gets charged with interest instantly. Cash advances and balance transfer generally do not have a grace period so you are charged with interest the very moment you make the transaction. Your credit card agreement includes a clause of the grace period for your reference.
Credit card Fee: you also must know the credit card charges or fees before applying for one. The credit card charges generally include annual fees, the late payment fee, etc. there are few credit card charges that you can avoid. These charges generally include late payment charges. Different credit cards have different charges under different heads. You study your credit card agreements to have knowledge about how much are you being charged and for what.
These are the general features of a credit card you must know for selecting and analyzing a credit card for your use.