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.
Democratic leaders of the government have been pushing for closure on a bill dealing with credit card rate increases and fees. If approved, the changes may push some issuers to altogether discontinue offering any type of bad credit card to high risk people.
If you have a bad credit score, apply now for a credit card to rebuild credit while such offers are still available.
President Obama's proposed changes will likely bring about strong negotiations in the Senate, though it is believed the Senate will pass some type of bill soon. Senators will need to give-and-take in negotiations to reach some form of agreement. There is a great need for a law regarding credit card issuers raising fees on account holders.
Last year the Federal Reserve made serveral changes regarding elevating interest rates. Issuers in the past have often raised rates for reasons some consumers feel are unfair. It will be in July 2010 before changes are in effect.
The bill from the Senate is rumored to be tougher and it has most all Republicans and one Democrate voting against it. Some Republicans have voiced the concern that a strict bill could make credit cards less available. Those with not so perfect credit would have more difficulty aquiring a credit card.
The greatest concern is that there is a balance between the consumer protection and credit cards that are available. One more problem is consumers with credit cards and two sets of interest rates. This may happen when a balance is transferred.
The goal is that consumers will have a chance to reduce their credit card debt. Payments need to be credited according to certain interest rates. One idea is to have any repayments deducted from the balance with the highest interest rate.
Some provisions of concern is the effective date of the bill, the time limit for dormacy fees on gift cards, and how late a payment is before the interest rate spikes. The bill is long overdue and much needed in the Credit industry and 2010 is a long time to wait.
Update 05-11-09 It appears that the Senate has reached an agreement about legislation regarding credit card rates and fees. This could rush the bill to a Senate vote. Arguments still may not be avoided and there is an earlier version of the bill that passed the House.
Lobbyist view the new bill as tougher. The bill could still be revised with amendments. Republicans and Democrats are working hard to try to get the bills in-line.
The Senate's new bill would eliminate dormacy fees on gift cards redeemed too late, prevent consumers under age 21 from receiving a credit card - unless they prove income or have a parent's signature, and it allows issuers to raise fees if the consumer is sixty days late.
The Republicans voted for the House bill changes that the Federal Reserve passed last year. One practice was to prevent issuers from raising interest rates when a consumer did not pay unrelated bills. The Feds revisions do not go into effect until July 2010.
Credit card issuers warn that the Senate bill will not be the final word and they will fight some of the provisions. They have concerns about the Senate's bill and are against any amendments. One concern deals with how cardholders are to be treated when they move debt from older cards to new low interest cards.
The concern is that consumers may have two different interest rates. Companies usually credit payments against the lowest interest rate first. The bill from the House would match the Federal guidlines about balance repayment and how to credit them. The Senate's bill would make payments deducted from the balance at the high interest rate. The House bill would credit repayments proportionally and gives consumers a chance to pay accrued debts.
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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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