Credit Cards: What to Look for Before You Sign

Chances are, you’ve received “pre-approved” credit card offers in the mail. Examine the fine print carefully before you accept any offer for a credit or charge card. Look for:

The Annual Percentage Rate (APR) – If the interest rate is variable, how is it determined, and when can it change?

The periodic rate – This is the interest rate used to figure the finance charge on your balance each billing period.

The annual fee – While some cards have no annual fee, others expect you to pay an amount each year for being a cardholder.

The grace period – This is the number of days you have to pay your bill before finance charges start. Without this period, you may have to pay interest from the date you use your card or the date the purchase is posted to your account.

The finance charges – Most lenders calculate finance charges using an average daily account balance, which is the average of what you owed each day in the billing cycle. Look for offers that use an adjusted balance, which subtracts your payment from your beginning balance. This method usually has the lowest finance charges. Check whether there is a minimum finance charge.

Other fees – Ask about fees when you get a cash advance, make a late payment, or go over your credit limit. Some credit card companies also charge a monthly fee.

What About You?

What's your experience with applying for a credit card? Was the application easy to understand?