Looking for a Credit Card for Christmas Shopping?
Before you submit a credit card application, first review the main points which will help you choose the right credit card for your needs.
What Charges You'll Make - If you're going to use the credit card mainly for booking airline reservations and hotels, it might be best for you to get a travel credit card that offers sky miles and hotel points or cashback. If this will be an emergency credit card only, then your main concern may be for a low interest rate credit card with low fees.
When You'll Repay Charges - Will you pay off credit card charges in full every month, or will you carry a balance month to month? If you're going to carry a balance, you want the lowest possible interest rate as well as a low introductory rate. But if you'll payoff balances in full every month, then interest rate really doesn't matter so no annual fee and/or a long grace period would be a bigger concern. If you're going to carry a balance, be concerned about how the finance charge is calculated. The most common method is the Average Daily Balance, which means that the daily balances are added together and then divided by the number of days in the billing cycle. Stay away from credit cards that compute the balance using two billing cycles, as this method costs more money in financing fees.
What Amount You'll Charge - If you're going to use the credit card for all your monthly expenses, then you need a card that has a high credit limit and a high cashback percentage.
More info about Interest Rates, Credit Limits, Incentives, Fees and Penalties
Interest Rates - The interest rate (Annual Percentage Rate) APR can either be a fixed rate or a variable rate that is tied to another financial indicator, most commonly the prime rate. With a fixed rate credit card you know what the interest rate will be every month, whereas a card with a variable rate can fluctuate. Of course, even the interest of a fixed rate card can change based on certain events, such as paying your credit card bill late, exceeding your limit, or simply because the credit card issuer decides to change it after providing you ample advance notice.
Credit Limit - This is the amount of money the credit card company will let you charge to the card. This amount varies depending upon the card offer and your credit history. Be sure to get a credit card with an ample limit, because getting close to your max can hurt your credit score. Just remember that you don't have to max out your limit just because it's available.
Incentives - To compete for and to gain customers, many credit card companies offer rewards. Even if you normally use cash, why not use your credit card and then use the cash to make the payment during the grace period? You still won't pay interest and meanwhile you'll rack-up rewards. A credit card with 5% cashback will earn you $5 for every $100 charged. If your total bills come to $2,000 per month, you'll earn a free $100 every month. Look for a rewards program that you'll use and which offers flexibility, such as cashback or travel.
Fees and Penalties - Compare common charges such as late fees, overlimit fees, balance transfers, cash advances, and for making payments by telephone. Regarding balance transfers, look for credit card offers with no transaction fees and zero percent interest for at least 12 months.
Do not expect to purchase your FICO score from all three Credit Bureaus. On February 14,2009 Experian terminated its agreement with myFICO.com which allowed consumers the ability to purchase of all three of their credit scores. To complicate the problem, lenders are able to see your scores but you can't. Credit scores are important and the law governing them should be changed due to the woes of the credit crisis and the effect on consumers.Lenders use FICO scores and Experian will keep selling FICOs to lenders. Experian does not indicate that this issue is a big deal. One reason this may be the case is that there are several ways consumers can get credit scores and be able to evaluate their credit worthiness.
Credit worthiness is important when a financial decision must be made like purchasing a home,a new auto, or even applying for a credit card. When Experian sells consumers credit scores they are sold what is considered "Educational" scores. This is Experian's PLUS or the VantageScore which is a formula devised with the two other major bureaus.These are often referred to as FACO scores because they are not FICO scores.According to some lenders, these Fake or Educational scores are often 30 to 100 points higher than a FICO score.The VantageScore scale is 501 to 990 while FICO is 300 to 850. A FICO score of 700 would be great but not so good for a VantageScore.
What is the importance of all three scores? Especially when making a decision to purchase a home, having all three FICO scores would certainly help as mortgage lenders obtain all three FICO scores to determine the interest rate.Usually they choose the highest score to determine the interest rate. If a score is missing such as the best score, it could mean a higher interest rate.
Fair Isaac created the FICO formula and Fair Isaac's agreement did not allow Experian to sell FICO scores.For now Experian seems to be reconsidering the relationship it has with Fair Isaac. Consumers seem to be caught in the middle of a battle between credit bureaus and Fair Isaac instead of being allowed access to information that is important in determining their financial decisions.It is important to see scores and to have the power to protest unfair scores. A credit score gives lenders some idea as to the risk they are taking that you will or will not pay your debt. It may signal there is the risk for skipped or missed payments. Consumers today want to make sure they know all their scores and many strive to keep a good score to ensure they get the lowest interest rates available.
Federal law guarantees that it is your right to see your credit reports. Credit reports are good if you need to try to determine why an application for credit or insurance may have been denied. Lenders should tell you why you are rejected and which credit bureau provided the report. This is so you could review your report to dispute errors. Even though you can buy your credit scores some lenders use scores you don't get to see. This is where changes need to take place in the interest of consumers.
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Credit Tip: Need a high limit for Christmas credit card charges? If you have bad credit, consider a personal loan by refinancing your mortgage. Even if you have cash to buy Christmas presents, we recommend using a prepaid card to make purchases because it's safer than carrying cash.
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