Don’t just pick a credit card issuer: consider these critical factors first

By LEO GIOSUÈ
(photo credit: INGIMAGE)
(photo credit: INGIMAGE)
When it comes to making our credit card choices, it is not uncommon to see a lot of us rushing into our decisions. Once an issuer approaches us with an attractive envelope and a list of perks, we gullibly jump at the opportunity of “free money.”
But what many of us fail to understand is that credit cards are just like chain saws – a very handy tool capable of inflicting the greatest of harms when handled improperly. Just like with the saws, credit cards are not to be joked with, and before you make a decision about getting them, it is important that you first consider some factors critically.
Factors to be considered before choosing a credit card issuer
Before you rush into your credit card decisions, here are six factors for you to consider:
  • The interest rates
  • Credit Limit
  • Fees and Penalties
  • Balance computation method
  • Incentives and perks
The interest rates
Before you proceed to take up that wonderful credit card offer lying on your desk, be sure to understand the type of interest rate that comes with it. Basically, on a credit card offer, the interest rate appears as the annual percentage rate (APR), which can either be a fixed rate or variable rate. 
If you’re being offered a fixed rate card, it means that the interest rate charged over the loan repayment will be fixed from month to month. With variable rates, however, there is room for fluctuation. 
Sounds quite explanatory and straightforward, right? Wait till you hear this. When an issuer offers a client a fixed rate card, it is not beyond them to hide some certain details from the client, such as how the rate can be altered in the future. I know you're surprised to hear that, considering I said that fixed rates could not be altered. Well, there is always an exemption. When you go over your limit or pay your card – or any other card issued by the same provider – late, the company might decide to trigger rate hypes on your card. They can also decide to increase a fixed rate just because they feel like doing it. Yes, they can do that too – just ask Mrs. Toni Riss of Texas.
With possibilities like these, I don’t think you still need anyone hammering it in your ear that you should conduct an extensive research about the interest rates of a provider before you strike a deal with them.
Credit Limit
Even if you’re so desperate to get a credit card to lead your urgent needs, such as a funeral plan, home bills, or what have you, always take your time with credit card issuer. For starters, always find out about the credit limits of an issuer before proceeding with them. Usually, the credit limit for every customer would depend on their credit history. 
However, it is not uncommon to see some issuers cutting customers’ credit limits to an amount that’s lower than their current balance. Now, when this happens, you run the risk of being penalized because you’ve maxed out your card. Always go for those issuers that don’t have a history of tampering with customers’ credit limits.
Penalties and Fees
If you want to avoid being cheated by a credit card company, then you cannot afford to joke with this factor. Luckily for you, not all credit card issuers charge or penalize customers the same way. Therefore, it is up to you to carefully consider this factor and find out those companies with favorable entry fees and not-so-harsh penalties in the event of defaults. Common charges include transaction fees, cash advances, credit limit increment charges, and balance transfers. They can also charge you penalties when you pay late or max out your card.
Balance computation method
Another factor worthy of consideration is how your prospective credit card issuer computes its finance charge. This factor is essential, especially if you ever have a reason to carry a balance. 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; this winds up costing you more money in financing fees. There are plenty of cards that don’t use it.
Incentives
Many card issuers offer reward programs to their customers to induce them to use the card. Assuming you're going to make the purchases anyway — and the card issuer doesn't charge extra for the rewards program — it can be a nice benefit. Look for a program that offers flexibility, such as cash or travel, and rewards you'll use, that are easily earned and redeemed. 
Bottom Line
Indeed, the process of choosing a credit card company can be quite challenging. However, if you want to avoid being cheated, deceived, or dragged into debt, you should take your time to evaluate just about any credit card issuer that comes your way. But if you still find it hard doing the research and analysis yourself, you can find platforms that compare money packages like this. 


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