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.
Does your issuer offer a credit card opt out agreement?
Recently some credit card companies have raised the interest rates on millions of credit card holders. Both Citibank and Bank of America raised the rates and sent notifications about the increase. Contacting the credit card company to discuss the rate hike may be in your best interest.
One point to discuss with a credit card company is if they have an "Opt-Out" deal. This may allow a consumer to pay off the old balance at the lower interest rate. The Opt-Out usually only applies to the current balance and any new charges added can void the Opt-Out deal. A simple phone call could land you a lower interest rate until you pay the balance in full.
The great thing is that the credit card account could remain open after the old balance is paid without closing the account. Closing a credit card account can affect credit scores. The benefit to the company of having an Opt-Out option is that it is more likely the consumer will charge once the old balance is paid. The company would then be able to make money when the consumer charges under the higher interest rate.
Once an account using the Opt-Out option is paid in full, it would be a good idea to consider making a charge every two or three months. It is important to charge only what can be paid off in full. This would help keep the account open and help with credit scores if the balance is paid in full or in a timely manner. With the credit crunch,some consumers with more than one credit card account have experienced some companies closing some of their accounts.
The Federal Reserve G.19 release - which is two months behind, shows that consumer credit dropped about 9% in February which is one billion more than expected. Most of the decrease came from revolving credit while mortgage and auto loan credit slightly increased in February. Consumers may be paying off their credit card debts and not using their cards as much or they have decided not to use their cards as much. Another factor may be that since credit card companies have been reducing credit limits, consumers have decided not to carry any credit card debt. Consider contacting your credit card company to inquire if they have an Opt-Out deal, it may save you higher interest fees.
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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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