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Choosing a Credit Card for the Inexperienced

Before applying for a specific credit card there are several things you should take into consideration before making your final decision.

Credit History – Before you apply for a card you should get a free credit report so you will know what types of cards you are eligible for. (By law you can can get a free credit report once annually). If you have a limited or damaged credit history you will have to limit your potential choices to cards that cater to your particular situation. For example, cards such as the Aspire Gold Visa, Orchard Bank Gold Mastercard and the Orchard Bank Platinum MasterCard (to name a few) are cards geared toward consumers wishing to establish or rebuild their credit. These cards usually have higher aprs and come with annual fees.

So you will have to shop around checking different offers — maybe even make some phone calls in order to find the best credit card for your financial situation. By using one of these cards responsibly for a certain period of time, you will eventually be able to upgrade to a better card with better rates thus improving your credit rating.

Keep in mind that if you apply for a card that requires a better credit score than you currently have — you WILL be rejected. Consequently this rejection will be placed on your credit report and will adversely affect your chances for getting approved for other credit cards as well. So unless you are pre-approved make sure you know where you stand with your credit rating before applying.

On the other end of the spectrum if you have good to excellent credit you will have a much wider array of choices with much better rates, terms and conditions. Experienced credit cardholders usually base their decisions on the following criteria:

Introductory APR – This is usually the most alluring component of any credit card offer. Many credit card companies will offer 0% apr for certain periods of time. For instance these intro rates can last anywhere from 6 to 15 months. In these cases you should always check to see what the regular apr is once the intro period is over. Also be advised that if you are late with just one payment (default) all aprs associated with your card will automatically increase to an exorbitant rate — some are over 30.00%…pay your bills on time.

Annual Percentage Rate – Is the apr that represents (part) of the cost of credit on a yearly basis (after the intro period expires) and is usually applied to new purchases, balance transfers or both. You will need to check the cards terms and conditions for particulars — The lower the better.

Annual Fees – Many Credit Card companies will charge annual fees which can range anywhere from $25 to several hundred dollars depending on the type of card. These fees are usually associated with rewards based credit cards. On the other hand there are many card offers which have no annual fee – Shop around

Transaction Fees – Unless otherwise stated, credit card companies usually charge a fee for exceeding your credit limit, making a late payment, getting a cash advance and on balance transfers. Make sure you know these fees before applying.

Grace Period – Accept for a limited or poor credit history, most credit cards offer some sort of grace period which can be 15 to 25 days. This is a free period in which you will not have to pay finance charges if you pay your balance in full by the due date. This doesn’t mean you have 15 to 25 days after the due date to make the minimum payment.

When trying to decide on a credit card the bottom line is to understand what you want from the card, your spending habits, your credit score, what the card has to offer, the terms, conditions (fine print) and all the expenses the card has associated with it so you can make a more informed decision and avoid any unexpected expenses or marks against your credit score.

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