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May 2004

The Hunt for the Right Credit Card

   Recently, I have been bombarded with credit card advertising that promises low interest rates, lengthy grace periods, no annual fees, cash back, low late-payment charges, and low over-the-limit fees. However, when I looked closely at the fine print, I discovered these credit offers were no better than what I currently have, even if the headlines appear to promise something better. What should you do to help get the right credit card for you?

   The short answer is that you should shop around and read the fine print.

   Begin by determining the features that fit your purchasing needs. For example, do you pay off the balance every month? If you do, then the interest rate on balances may be less important than the length of the grace period. If you plan to carry a balance, then the interest rate should become very important. Check the card’s APR. The APR is the annual percentage rate you will pay, on an annual basis, if you carry balances. Make sure the advertised interest rate is not a “teaser” low-interest rate that moves higher after an introductory period. Also, check the interest rate closely. Is it fixed or is it variable? If variable, what is the index?

   Next, determine whether the card is accepted nationally and at the stores you frequent. What are the penalties if you make late payments? What method is used in determining your outstanding balance and resulting finance charges? What is your grace period? Do interest charges accrue right away or after a certain time period? Can you pay online at a secured site or must you pay by mail?

   After you think you have sorted through the offers and found the best one, call the card issuer to verify the publicized information. Make sure, if possible, that you have the promises in writing. Just yesterday, one western Wisconsin consumer told me that her son’s credit card was quite different than promised. Unfortunately, he is now being charged several fees that she believes were not clearly disclosed to her son before he applied for—and used—the new credit card.

   If you already have a credit card and have a good credit rating, ask your current card issuer to lower your current interest rate or to reduce or waive your annual fee. I did this and saved more than $50 per year for a frequent-flyer mileage card.

   Finally, the Federal Reserve Bank maintains a very helpful credit card survey list at http://www.federalreserve.gov/pubs/shop/tablwb.pdf

   You Really Can Eliminate Most Pre-Approved Credit Card Offers. WECN readers keep asking: How do cut the number of pre-approved credit card offers that come in your mail? I am happy to once again give you the answer. The three major credit reporting agencies have banded together and created a service that allows you to opt out of receiving most pre-approved credit card offers for either two years or permanently. You will be asked to provide some personal identifying information over the telephone, but this is a legitimate service. Call toll-free, 1-888-567-8688. You will be glad you did.

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