Finding the best credit card is mostly a matter of comparison shopping, but before you accept a credit card offer, make sure you understand the card's credit terms. For instance, what is the annual percentage rate? Is there a grace period? How much is the annual fee? Once you have the answers to these and other answers, then you can compare several cards at once and figure out which card meets your particular needs and which one offers you a better deal.
Tip: Figuring out which card is best for you is not always obvious because it really depends on how you plan to use the card. For example, if you plan to pay your bills in full each month, fees and the length of the grace period may be more important than the periodic and annual percentage rate. If you anticipate using your credit cards to pay for purchases over a period of time, then the annual percentage rate (APR) and the balance computation method are important terms to consider. In either case, keep in mind that your costs will be affected by whether or not there is a grace period.
When it comes to shopping around for a credit card there are a few terms you should know and understand. These include:
Annual percentage rate. The annual percentage rate or APR is a measure of the cost of credit expressed as a yearly rate.
Periodic rate. The card issuer also must disclose the periodic rate applied to your outstanding account balance to figure the finance charge for each billing period.
Variable rate. If the credit card you are considering has a variable rate feature, the card issuer must tell you that the rate may vary and how the rate is determined. You also must be told how much and how often your rate may change.
Grace period. The grace period allows you to avoid the finance charge by paying your current balance in full before the due date shown on your statement. Knowing whether a credit card plan gives you a grace period is especially important if you plan to pay your account in full each month. And, thanks to the Credit CARD Act of 2009, if the credit card has a grace period finance charges for the month cannot be assessed unless you receive the monthly statement 21 days before the financing charges begin.
If there is no grace period, the card issuer will impose a finance charge from the date you use your credit card or from the date each transaction is posted to your account.
Annual membership. Most credit card issuers used to charge annual membership fees, but this is no longer the case. There are plenty of cards out there with no annual or other participation fees. For those card issuers that do impose annual fees, they typically range from $18 to $95. The annual fee for an American Express Platinum Card is $450.
Other costs. A credit card also may involve other types of costs such as balance transfer fees and fees for cash advances, or late fees.
