Here’s how to choose a new credit card
If you’re considering getting a new credit card, you’ve probably got a good reason. You may be thinking you’d like to earn miles toward air travel or a hotel stay. Or, if you drive a lot, you may want to reduce your gas expenses by using a cash-back card.
But if you decide to go ahead and apply for a new card, think also about how much it may cost you, advises Consumer Reports. Consider whether you’ll be paying off your credit card balance each month, and what the interest rates are on outstanding balances.
Here’s what Consumer Reports suggests you consider:
• Up-front bonuses. Some cards offer cash bonuses for signing up and spending a certain amount – usually from $500 to $3,000 – within the first three months. A bonus may include 40,000 miles just for signing on or an extra $500 in cash back in the first year.
• Teaser rates. Many cards offer you initial, low interest rates, which can be attractive to people who carry a balance. Some even carry zero-percent introductory offers. If you are tempted to apply for a card that offers such a teaser rate, read the fine print so that you know how much the rate could rise when the introductory period is over. Otherwise, without realizing it, you could end up paying a high interest rate on any out-
standing balance that you have. If you are considering such a card because you are already paying interest on a different card, find out what the balance transfer fees are before transferring the balance to a new card.
• Free airfare. Frequent fliers might be enticed by “free round-trip ticket” promotions by airline and bank cards. Bank cards usually let you redeem points with any airline, so you generally can get an unrestricted flight without being subject to blackout dates and limits on the number of reward seats. With cards issued by airlines, you might need to use up to 50,000 points to get an unrestricted flight on the dates you want to travel.
• Waived annual fees. Many credit card issuers waive the annual fee in the first year. But in the following year, the fee could kick in. So consider it carefully. An annual fee may be charged when the card offers rewards, such as frequent flier miles, hotel points or even cash back. Is it worth paying? It depends how much you travel. If you are a frequent flier and the airline you fly charges you a fee to check luggage, you may be better off paying the annual fee and getting that perk for free.
• Secured cards. If you have a low credit score, a secured card, which requires a security deposit, may be appealing to help you improve your credit. This may be your only option. But some cards are far better than others, and you need to be on alert for onerous fees.