Credit card offers are a jumble of small print and percentages, and there are some key points that you should focus on when evaluating a card's pros and cons. If you're on the hunt for a new card, make sure you take the time to compare and contrast several different offers so you can select the best one for your lifestyle. CNN Money wants us to know how to spot a credit card ripoff, and here are the main areas that I focus on when I'm sorting through the fine print.
- APR: The annual percentage rate will appear in big bold print, but that number doesn't tell you everything about how much you'll be charged to borrow money. Pay attention to whether the APR is fixed or variable; I always seek out a fixed APR over a variable one so that I don't have any interest rate surprises when the prime rate increases. Most rates are variable, so be sure to do your due diligence, and if there's an introductory rate, take note of when it expires.
There are two more aspects of a credit card offer you should especially keep in mind, so just
- Default rate: While none of us ever plan on making a late payment or going over our credit limit, mistakes do happen. Find the explanation next to an asterisk that describes what actions (or inaction) would trigger the default rate, which can be more than 30 percent!
- Finance charges: Issuers can calculate a finance charge in one of two ways: two-cycle average daily balance / two-cycle billing or average daily balance. Because two-cycle billing means you might pay interest on debt you've already paid off, ideally you want a card that uses your average daily balance to calculate the finance charge.