Credits cards allow you to buy items and pay for them over time. It's a form of borrowing since you have to pay the money back. Most people receive credit card offers in the mail. Many offers state you've been "pre-approved" and promise low introductory rates. However, these offers aren't all the same. Make sure to examine and compare your options before you accept any offers.

Examine the Credit Card Terms

The best way to determine which credit card offer to choose is to compare all the terms on the card applications. The applications must generally tell you all the important terms you need. This will allow you to easily compare one offer to the next.

Fees: One of the first things to check are the fees. There may be a variety of fees that companies will attempt to charge you. You may be charged these fees one-time, monthly or periodically. The fees may go by many names, including activation, participation, acceptance, monthly maintenance and annual fees.

Charges: Many companies charge you for a variety of reasons. This includes any time you get a cash advance using your card. There may also be penalty charges, such as when you exceed your credit limit or make a late payment.

Annual Percentage Rate (APR): Your APR tells you the cost of your credit. It's displayed as a yearly rate. You must be told this rate before your card can be activated. The rate that'll be applied to your outstanding balance must also be disclosed.

Your APR can many times be changed by the issuing company. The change is based on interest rates and other economic indicators called indexes. Credit cards that change based on indexes are also called variable rate cards. You must be told how the rate can change.

Grace period: Many companies will offer you a free period, or grace period, to pay your balance. You can avoid finance charges if you pay before the end of the grace period.

Finance charge balance computation method: You need to check to see how the issuing company determines your finance charge if you don't pay the full amount every month. The method it uses will have a great effect on how much you pay a month. Some balance computation methods include average daily balance, adjusted balance, previous balance and two-cycle balance.

The most common computation method is average daily balance. The method that usually favors most consumers is adjusted balance. Ask the issuing company if you don't understand how your finance charge will be calculated.

Balance Transfer Offers: You may receive offers to transfer your balance from one credit card to another. The incentive is to reduce your monthly payment. The offers can differ greatly and have complicated terms.

Choose the Credit Card that Fits You

There's not one credit card that's best for everyone. Think about which credit terms will affect you the most. Do you pay off your balance every month? The finance charge computation method may not be as important to you. However, if you usually pay for your purchases over a long period of time, the APR and computation method will probably help you decide which credit card offer to choose. Any type of annual fee will affect everyone, regardless of use.

Questions for Your Attorney

  • Can I cancel a credit card anytime or am I locked into a contract?
  • What should I do if I can't pay the balance on my credit card, and the finance charge is unreasonable?
  • I was misled when I accepted a credit card offer. Who do I contact to report this fraud?