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Determine your basic goals before you begin:
- How much will I spend with the card each month?
- Do I plan to carry a balance at the end of the month?
- How much am I willing to pay in annual fees?
- Do I have a strong credit history? Is my credit in need of rehabilitation?
If you've had credit problems, you might have to settle for a card with a slightly higher rate. If you have poor or no credit, you may need a secured credit card. Once you have an idea of what you are looking for choose the card right for you by following these four steps.
Step 1: Research
You can use both online and offline resources to learn about credit card offers and ratings for credit cards.
The U.S. Federal Reserve Board provides guidance and advice
at http://www.federalreserve.gov/consumers.htm.
Gather information on several cards that fit your basic needs.
The Federal Truth in Lending Act requires that you have access
to the following information so that you can compare one card
to another:
- finance charges in dollars and as an Annual Percentage Rate
- the credit issuer or company providing the credit line and the size of the credit line
- length of a grace period (interest-free time) before payment must be made
- minimum payment required
- annual fees
- fees for credit insurance (if any), which pays off your loan if you die before the debt is fully repaid
Step 2: Review
Review all of the cards you've researched. Create a chart so you can see which offers the best APR, cash rebates, discounts, credit limits, or fees. You may not need some benefits, so you can ignore them. For example, if you will be using the credit card for only a few purchases and will pay off your balance every month, you might choose a card that offers rebates and other rewards for use, even though such cards usually have a high APR. Choose the card that offers the best deal for you, not the one with the biggest credit limit.
Step 3: Credit Unions
Credit unions offer a number of advantages. Because they are nonprofit and have lower overhead, they charge lower interest. However, there may be some additional requirements, as well-from membership to working for a limited number of companies. You may be required to join the credit union by opening a share or savings account before you get a card.
Step 4: Compare
Even if you already have credit cards, compare the cards you've found to your current plan. If you have a good credit rating, you may be able to convince the institution that issued your card to lower your current rate.
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