When it comes to opening a new credit line, it's smart to research so you know what to look for in a credit card offer. Credit card companies, big banks, credit unions, and even your local retailers all have their own credit card products, so understanding how each works, and how they impact your finances is wise before sending off your application.
Below you’ll find a list of five points to consider and what to look for in a credit card when evaluating your options.
1. Low APR
A low annual percentage rate (known as APR) is an incredibly important factor in what to look for in a credit card offer. Simply put, the credit card with the lowest APR is the best choice.
Compare the rate of credit cards you're considering and take into account that credit cards can have varying rates.
For example, there are credit cards that have a 0% introductory rate. However, after a certain point, that rate increases. Others have higher rates that can apply only to cash advances. Keep all of these things in mind!
While the standard rate is the most important in the long run, it is still wise to familiarize yourself with how the rate may change over time.
2. No Annual or Hidden Fees
Many cards come with an annual fee just for being an account holder. And oftentimes, additional hidden fees are lurking in the fine print.
You may be charged fees that really add up. One surefire way to eliminate unnecessary fees is to pay your bills on time. You also want to make sure you don’t go over your credit limit or else you could be hit with a fee for that, too.
Wasatch Peaks Credit Union offers members several credit card options with no annual fees!
3. No-Fee Balance Transfer Options
A balance transfer is a credit card transaction where debt is moved from one account to another. For those paying down high-interest debt, this can save you a significant amount of money on interest charges.
However, balance transfers do come with costs and limitations. You may have to pay a balance transfer fee, which typically amounts to 3% to 5% of the total amount you are transferring. If your balance transfer card's limit is low, you likely won’t be able to transfer your full balance.
When looking into credit cards, an ideal balance transfer credit card has one or more of the following:
0% introductory APR offer
$0 annual fee
$0 balance transfer fee
4. Purchase Protection Features
Most major credit card networks offer purchase protection, but this feature may differ depending on the issuer. These differences can impact the length of time you have to submit a claim, the time in which your purchase is covered, and your claim limits.
Purchase protection usually covers a basic theft and damage of eligible items within a specific time frame. For this item to qualify for purchase protection, you must buy it with the credit card you’re filing your claim under. Most major credit card issuers also require a police report to be filed in the instance of theft.
5. The Right Credit Card Limit
Your credit limit is the maximum amount of money you have available to you. The higher your credit limit, the more credit you have to spend on purchases or cash advances.
Your credit limit is calculated in one of three ways:
- A predetermined credit limit
- Your credit history and credit score
- A full analysis of your credit history, determining whether you’re a potential credit risk, and also a check of any other accounts you currently have open
Some credit card issuers offer predetermined credit limits to every cardholder who applies. However, others prefer using various combined factors, like credit history and score, to determine your credit limit.
After having a credit card for some time, you may find that requesting a credit limit increase is a smart move for you. If you can keep your credit utilization ratio low, and make timely payments, increasing your limit (but not spending too much of it) can boost your credit score.
Next Steps in Choosing the Right Credit Card
Now that you know what to look for in a credit card, you can weigh all of the pros and cons of card offers you are considering.
Next, you need to think about pre-qualification and pre-approval. Some credit card issuers use these terms interchangeably. However, pre-qualification is an estimate of what you qualify for, while pre-approval is approval for a specified amount.