Things to Consider Before Accepting a New Credit Card

It's becoming increasingly difficult to get by in our society without a credit card – or at the very least, a debit card with a credit card logo. Travel arrangements, restaurant reservations, online business transactions and placing orders by telephone all require the use of a credit card. Here are some things to consider before signing your name to a new credit card application:

Don't Get Too Many Cards – there is hardly ever a good reason for a person to have a wallet overflowing with multiple credit cards. Typically, you only need one or two credit cards. Be selected and choose cards that will work best for how you use them and pay them back. Too much credit available can lead to bad financial decisions made on a whim, and then unmanageable debts.

Take a Hard Look at Your Spending Habits if You Get A lot of Credit Card Offers – just because you have four credit card offers in your mailbox every day does not mean you can afford more credit cards. In fact, credit card companies tend to target individuals who are most likely to rack up big balances because they know they'll make the most interest off you.

Don't Fall For Teaser or Promotional Rates – many credit cards do their best to entice new customers through teaser or promotional rates. These are typically lower than average interest rates on new purchases or balance transfers that apply for a limited time – but then once that time is up, the interest rate shoots up. These are also cards that often send your interest rate skyward if you make a payment late. The permanent interest rate on a credit card is much more important than the temporary promotional offer you get; unless you are using the card to pay off a higher interest account and will have the balance completely paid in full before the promotion ends.

Examine More Than the Interest Rate – while the interest rate on a credit card is an important consideration before accepting a new card, it's not the only thing that matters. The interest rate actually only matters for people who carry a balance from one month to the next, because if you pay your balance off in full within the stated grace period (typically 20 days), there is no interest charged. Also, when you make a decision for a credit card based solely on the interest rate, you might be very disappointed when the interest rate changes a few months after you get the card. Even “fixed rate” interest cards can adjust their interest rates.

How Does the Credit Card Billing Cycle work - knowing the cards billing method is a good idea. Will the interest be applied to your purchases from the day you use the card, or is there a grace period? How many days do you have between billing cycles to pay off your balance before interest is applied? Know exactly how long this grace period is because your lender is likely to mail the bill out late in the billing period, giving you just a couple days in which you can get your payment out before it falls outside that grace period.

Understand Late Payment Charges and Penalties – Check the credit card terms carefully to understand how late payment charges and penalties are charged to your account if you should make a payment late. See if a late payment will also result in an interest rate hike. Most credit cards apply the late payments and penalties to the card balance, and therefore you end up paying interest on these if you don't pay the balance of your card off in full before the end of the billing cycle, as well.

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