What to Look For in a Credit Card

When it comes to choosing a credit card, there are a lot of factors that need to be considered. For a new credit card user, there may fewer options available than there would be to someone with established credit, but there are always numerous cards available to help you build credit and enjoy rewards

When faced with a credit card option, such as the PetRewards Platinum Plus Visa Credit Card, it is important to look at the features of the cards, the rates and fees of the card, as well as the account options.

Annual Percentage Rates

First and foremost, you should find out what the introductory and regular APRs are. APR stands for Annual Percentage Rate. This is the amount of money you will pay to the credit card company for each purchase you make and do not pay by the end of your payment schedule. For example, the PetRewards card has an introductory APR of 0% for six billing cycles. This means that you will pay zero percent, or zero dollars, on the purchases you make with the PetRewards card for six bills. If you get the bill each month, that means you have six months of usage where you will not have to pay an extra amount over your actual purchases. A regular APR is the percentage that will go into effect after the intro APR period is over. The regular APR for the PetRewards card is 18.24% per billing cycle. This means that the user will pay 18.24% of the purchases they make after their card payments (their balance) to the credit card company for the benefit of using the card. For example, if a user has a $100 balance on the PetRewards card, the user will then be responsible for a new balance of $118.24. The reason credit card companies enact APRs is so they can cover their costs. By having a credit card, users have the ability and the privilege to make purchases without having immediate access to cash—credit card companies cannot give this benefit without making sure they can pay their employees and cover their costs, the APR covers these costs.

You might be thinking that $118.24 is a lot to pay for every purchase a user makes. This is why credit card companies offer a minimum payment option. Just because a user has a balance of $118.24 does not mean the user has to pay that much each month. Every credit card has a unique minimum payment requirement. Some credit cards require the user pays 10% of the card balance per month. In the instance of our PetRewards example, if the minimum payment was 10%, the amount to be paid would be around $11.82.

Cash Advance and Balance Transfers

There are other options too. Sometimes users can perform balance transfers. This means the user can move their balance from one or more credit cards to a new card. If the user has a $200 balance on Card 1 and $350 on Card 2, the user might be able to move those balances to a third card. Then the user would have a $550 balance (plus the standing balance) on Card 3 and would only have to pay one bill per billing cycle. This can be a very helpful option for users who want to simplify payments. Some credit card offers included no balance transfer fees, but others charge a fee. It is important for users to consider the fees and make sure balance transfers are economical decisions.

There are also cash advance options. Many credit cards offer the option of withdrawing cash against the credit line. The credit line is the amount of money the credit card company is willing to allow the user to spend. A credit line of $1,000 means that the user can carry a balance (including fees and APRs) of up to $1,000. The cash advance amount availability is dependent upon the user’s credit and the card options. In the case of the PetRewards card, the APR for cash advances is 18.24%, the same as the regular APR. Many cards, however, do not approve cash advances over several hundred dollars, meaning that the entire credit line is not available for cash advance.

Annual Fee and Grace Periods

Another point the applicant/potential user should consider is the credit card annual fee. The annual fee is the amount of money the credit card company charges for the benefit of carrying the card. Some cards will charge users a set amount of money (for example, $50, $60 or $70) every year because the users want that card. The PetRewards card we’ve been looking at has no annual fee, meaning that the card is free to carry and has no costs in addition to APRs and extra fees like late payment fees, etc. Sometimes a card company will charge users extra money if the user’s payments are late, but that is something that varies from card to card.

Next comes grace period. This is the amount of time the user has before the credit card company begins calculating the APR on the balance. For the PetRewards card, the user has a grace period of 20 days. The 20 day grace period means the interest will not be calculated until after the 20 days are over. This gives the user time to make payments and minimize the amount of interest accrued.

Reward Programs

Finally, the rewards program for each card is the number one factor for most users. There are literally hundreds of cards available with numerous rewards programs. Some cards have retail rewards (like cash back at certain stores, or special deals), some cards have travel rewards (like air miles and vacation points) and some have cash rewards (the user gets cash in return for purchases). The PetRewards card has, predicatably, pet related rewards that are dispensed in a point system.

The following is a description of the rewards attached to the PetRewards card:

• Through the reward program, cardholders earn two points for every dollar spent at participating veterinary clinics, pet food retailers, farm and feed stores, and neighborhood pet specialty stores, and they earn one point for all other purchases.
• Cardholders receive an additional 500 bonus points after their first purchase, and rewards begin at just 750 points.
• Points are redeemable for veterinary services, pet food discount certificates, and shelter donations.
• In addition to the reward program, the card offers cardholders platinum benefits such as auto rental insurance, various travel and emergency assistance services, purchase replacement, and no liability for unauthorized transactions.
• Cardholders can also choose to have their favorite photo of their pet on their card, or they can choose from several card designs.

These rewards are very straightforward for the PetRewards card, but some credit cards have a complicated rewards system. If you have questions about your card and your card’s rewards, you should contact your credit card company for an explanation. It is important to make sure you understand all components of your card so you can avoid extra fees and complications. Credit cards can be very useful financial tools. They can help users gain credit, make important purchases and pay for unforeseen costs, but they require responsibility and knowledge to use successfully.

Please do your research before you apply for a card and start using a credit card, your credit depends on it!