Credit Card Application Tips
Although we’ve been online since 2004, we’re just getting started with our blog. And, in honor of Martin Luther King Day, which our president elect has deemed National Service Day in 2009, we thought we would provide visitors with useful information on how to get the best deal on a credit card.
Getting the Best Credit Card Deal
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Getting the lowest interest rate: Credit cards generally advertise the lowest available interest rates in bold. However, almost all credit card companies offer tiered pricing. With tiered pricing, individuals with the best credit scores are offered the lowest rates, while those with good or average credit will be offered higher rates. Oftentimes, there is a substantial difference between the lowest advertised rate and the high tier rate. For example, a typical credit card may advertise a 10.99% interest rate to consumers with excellent credit and an 18.99% interest rate to consumers with average credit. Unfortunately, no credit card company will tell you your interest rate until after they have reviewed and approved your application (the same is true with credit limits). Thus, when looking for a low interest credit card, keep in mind the fact that your rate may not be the lowest available.
- Be sure you get a 0% APR for a full year: When you apply for a new credit card, you should definitely take advantage of 0% APR offers. However, when you apply for a credit card that advertises a 0% APR for “up to 1 year,” you may be approved, but only offered a 0% APR for as little as 3 or 6 months. This is due to tiered pricing, the same factor used in determining interest rates. Generally, individuals with excellent credit will be approved and granted a 0% APR for the full year. However, individuals with lower credit scores may get a shorter 0% rate. To avoid this issue, either apply for a credit card that grants all approved applicants a 0% for a full year (or until a certain date).
- Be really, really sure you get a 0% APR for 1 year on balance transfers: While this may seem redundant, it is particularly important to stress the importance of locking in a 0% APR for a full year on balance transfers. Why? Balance transfer fees. Over the past few years, credit card companies have removed fee caps on balance transfers. A year ago, maximum balance transfer fees were the greater of 3% or $75 and some credit cards offered no fee balance transfers. Today, all major credit cards charge 3% balance transfer fees with no limits. Thus, if you are doing a balance transfer and paying fees, you want to make sure you get a full year without interest.
- Pay balance transfer fees: Don’t let 3% balance transfer fees deter you from doing a 0% APR balance transfer. Balance transfer fees are a nuisance, not a deal breaker. A person with a 12% interest rate will save close to $100 for every $1000 transferred to a credit card with a 0% APR for a year. Yes, paying $180 in balance transfer fees may seem expensive when doing a $6000 balance transfer. However, you will save over $550 in interest over the course of a year by transferring your balance.
- Don’t pay annual fees unless…: There are only two types of people who should consider paying annual fees. The first are those with average or fair credit. Credit cards for those with less than perfect credit tend to come with annual fees. However, be careful of these offers. Many sub-prime credit cards charge exorbitant fees in excess of $100 a year. The second group that may consider paying annual fees are credit card rewards junkies. If you know how to earn tons of rewards, paying an annual fee shouldn’t be an issue. However, most credit card users who want rewards are best off with a no annual fee cash back rewards credit card as opposed to a point or airline based rewards program with a fee.
We hope this little guide proves helpful to visitors and would love to hear feedback from you. Post a comment with any tips below and help others save money!