By Milton Jones, Collections & Card Services Director
Credit cards can be a smart financial tool when used well. The right credit card can:
- Help you build or repair credit
- Help you pay down higher-interest debt
- Be safe and convenient to use while traveling
- Keep your cash or savings liquid if you have an emergency or need an
- Reduce the risk of fraud involving your checking or debit card accounts by using a separate payment method to make purchases
It’s important to be conscientious of your spending habits and how you manage your money. Will you carry a balance or will you pay off your credit card statement each month? When will the payment be due? Make sure your credit card usage fits into your personal budget and financial plans.
Examine credit card offers carefully
Enticing credit card offers may flood your mailbox, inbox, checkout lines and virtual shopping carts. The savings or rewards sound like great deals. But the fine print may have you paying more than you bargained for.
For example, you might receive an offer like, “Save 20% on today’s purchase when you sign up for the store credit card.” That 20% discount might come with an 18% annual percentage rate (APR) – or higher. If you don’t pay off the balance right away, your “savings” disappears quickly and you could end up paying more than the full retail price.
Be sure to examine offers carefully before signing up. Instead of opening a new store credit card, a better option may be to use a Cinfed Mastercard which offers lower rates, plus the opportunity for rewards or cash back.
Find answers to these four questions
Do some homework before you sign up for a credit card to make sure you’re getting the best deal. Find the answers to these four questions:
- What’s the APR*?
You want to find the lowest annual percentage rate possible, particularly if you think you will be carrying a balance from month to month. Credit card companies advertise the lowest rates, but you might pay a higher rate depending on your credit score or lack of credit history. Talk with a Cinfed financial coach who can help you compare credit card offers with Cinfed, with some of the lowest rates in the industry.
- Is there a penalty APR*?
Will you pay a higher interest rate if you make a late payment or miss a payment? What is the penalty APR* rate? “Life happens” and you may be in a situation where you miss a payment deadline. Cinfed will not increase your APR* based on a missed or late payment. Be sure to ask about a penalty APR* before you sign up.
- What’s the APR on balance transfers?
Balance transfer cards offer low or zero interest on transfers … but for how long? There’s usually a time limit. What interest rate will you pay if you don’t pay off the balance in the allotted time? How does that compare to your current interest rate?
- Are there any other fees?
Is there an annual fee? Balance transfer fee? Cash advance fee? Late payment fee? Hefty fees could wipe out any savings from a low interest rate. For comparison, Cinfed does not have balance transfer or cash advance fees.*
Remember that the number of credit cards you have, how long you’ve had them and the balances you carry on them all affect your credit score. The higher your credit score, the lower the rates you can get on credit cards and loans. To learn more about credit cards and credit scores, visit your local Cinfed branch or our online Financial Education Center.
*APR = Annual Percentage Rate. Balance transfers are subject to the terms and conditions disclosed in the agreement governing your credit card account (“Credit Card Agreement”). Subject to credit approval.