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.
Regulators are concerned that the new credit card rules which will take effect in 2010 may need some clarifications. The concern is to make sure institutions know how to abide by the new rules. Interest rate increases are a big concern and the new rules should not be vague about interest issues.
The new rules must make clear all guidelines that involve consumer purchases or purchases made under programs that delay interest payments. If the rules are clear, this helps to avoid possible confusions or problems. Anyone who has an interest in the clarification made by the Federal Reserve, will have a set time span to make know their concerns.
The "universal default rate" is a policy that companies use outlining when interest rates can be raised on an account. Different companies have differest policies. Interest rates could be increased for simple reasons. Companies have different universal defaults. Some have extremely high interest rate hikes while others are more reasonable.
Recently, some companies are offering incentives-like cash for consumers to reduce their debt or pay off their debt and close their account. This may indicate the consumer is not counted as an important account holder. Other companies are going to the extreme by raising fees and lowering credit limits.
Companies make money when consumers constantly borrow, are usually late paying, and only pay the bare amount due. Now companies are wanting to eliminate their risks with such consumers. Inactive accounts are being closed and limits on credit are being slashed.
Lenders are not taking many chances with existing consumer accounts and are very careful about establishing new accounts. Even good paying consumers could be considered a risk with the loss of jobs and cutbacks this year. Lenders have to wonder which of their consumers are having to choose which bill gets paid first each month.
Consumers who have high debt balances and are not spending money are not good customers. Companies earn money from late fees and interest. When customers don't charge and just pay the minimum due it can be a warning sign to a company that the consumer may be struggling.
Some companies have programs in place to help consumers with their debt. They may settle for a lower payoff or keep interest rates at a certain percent until a balance is paid in full. Programs vary with different companies.
Recent economic changes have caused some consumers to stop charging on credit cards. Consumers who don't charge could risk their account being closed. Making manageable charges that can be paid in full is one good way to keep good credit scores or to work toward rebuilding scores. Not all companies have the same policies so hopefully the new credit card rules will end unfair practices of many companies.
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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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