1. Applying for Credit Cards (4)
Scrutinize any preapproval solicitations for nonbank cards. A “gold” or “platinum” card with a high credit limit may be nothing more than a card that lets you purchase items through catalogues provided by the company itself. No other merchant accepts these cards and the company won’t report your charges and payments to the credit bureaus. Also, the items in the catalogues are usually high priced and of low quality.
When it comes to obtaining a new credit card, you may not have as many choices as people who already have good credit. But you should still do some comparison shopping to make sure you are getting the best deal available to you. Credit card terms and interest rates vary—and some of those variations can make a huge difference to your wallet.Always shop for the card with the best interestrate and terms. Here’s what you should look for ina credit card
• Avoid high interest rates. Credit card companies disclose the interest rate in several ways, but you want to look at the Annual Percentage Rate (APR). This is the amount of interest, transaction fees and other charges that you will pay per year, expressed as a percentage. It is the best indicator of the actual interest you will pay.
• Avoid low introductory rates. Some cards have a low “introductory rate” (also called a “teaser rate.”) After a few months, the interest rate will skyrocket. Also, sometimes the advertised rate only applies to certain people, such as those earning a high income. The card company charges a much higher rate to
those who don’t qualify—which could mean an unpleasant surprise when your first bill arrives.
• Beware of unfair interest calculations. Most banks charge interest on the balance owed. A growing number, however, charge interest based on the average daily balance.
This is how it works: Say you charge $1,500 on your credit card and pay $1,200 on the due date. When your next bill arrives, a bank using the average daily balance will charge interest on the $1,500 average daily balance from the previous month, not on the $300 you still owe.
Taken From : Credit Repair by Attorneys Robin Leonard and Deanne Loonin
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