Charge It!

Using credit cards to pay for goods and services is a fact of life for most consumers. Yet, many consumers do not take the time to comparison shop for credit cards. We are more interested in rebates, bonuses or perks that allow us to earn credit toward other services or purchases. The more we charge with our credit cards, the bigger our rebate or bonus, but we fail to realize that usually these cards carry higher annual fees and finance charges. It is not a problem if you pay off your balance each month, but statistics on credit card use show that Americans are carrying increasingly high levels of credit card debt.

Almost everything can be put on a credit card. You can use credit cards to pay for telephone calls, speeding tickets, every kind of service, support for charitable organizations, funerals and credit cards can even reimburse you when purchases are lost, stolen or go on sale. So it is important to compare credit terms and costs of similar cards so that you can select the credit card that will give you the features and terms that meet your needs.

Types of Credit Cards

There are four basic types of credit cards:

1. Travel and entertainment cards such as American Express or Diners Club. They have no predetermined spending limits and must be paid in full each month.
2. Bank cards such as MasterCard, Visa, Discover, Optima, GM and Ford cards, which are sponsored by individual banks. The bank defines spending limit (sometimes called credit lines) and each offers different terms and conditions. Banks offer a choice of payment methods, either pay the balance in full with no interest or pay a minimum part or some part of the balance with a finance charge.
3. Company or Retail store cards such as Sears, J.C. Penney, Shell or Mobil. These cards are only accepted by the specific company and do not have an annual fee. However, the terms and conditions of these cards vary widely.
4. Stored Value Cards we feel this is the best solution too keep your credit card spending under control. In fact many parents are now using stored cards with the Master Card logo to teach their children about credit cards. A Stored Value Master Card is a card that you put money into similar to a debit card, you are only able to spend the amount that you have placed on the card. This gives you all the convenience of a Master Card without the interest rates or finance charges. For more information about the Stored Value Master Card visit our partner at Wired Plastic, which now offer even lower start up fees for CreditTools.com customers.

Benefits of Credit Cards

• You can shop or travel without having to carry large sums of cash. Credit cards are accepted all over the world and generally give the best currency exchange rates.
• You have immediate use of goods and services, especially important for expensive items like appliances or furniture.
• Credit cards can be used to deal with unexpected financial emergencies.
• They will help you keep track of how much you are spending each month by giving you a record of purchases.
• Credit cards offer a protection against theft. If your card is lost or stolen and you notify the credit card company immediately, you can only be liable for $50 of unauthorized spending.
• Some credit cards offer special services such as reserving rental cars or tickets, replacement of lost or stolen merchandise, extension of the warranty or guarantee, air travel insurance and collision damage waiver insurance for rental cars.
• There is also consumer protection power with some credit cards. The credit card company may intercede on your behalf if you are unhappy with a purchase or if you failed to receive a purchase.

Evaluating Credit Cards

When you evaluate various credit card options, consider the following factors as well:

• Compare the credit card interest rates. Look for a low interest rate card but remember the interest rate is not fixed so it can be adjusted either quarterly or by written notice by the bank or company. You may be able to negotiate with your bank for a lower interest rate.
• Compare how finance charges are calculated to help determine the total cost of credit.
• Look at all charges for each card. Some companies add other fees, such as late-payment fees if your payment arrives after the due date, or transaction fees every time you use the card. Grace periods vary as well. Companies generally start the grace period at the time the purchase is posted to your account. However with some cards, the grace period can start on the day of purchase.
• Decide what credit limit is appropriate for you. Determine the amount of money you can charge each month based on your income.
• The credit card you choose should be widely accepted to accommodate the majority of purchases you make. Fewer credit cards will make it is easier to keep track of your credit spending.
• Compare services and features, such as travel insurance, rebates, purchase protection plans, cash-back incentives or extended warranties. Evaluate these features in terms of the extra credit costs to you.
• Make sure the annual fees are reasonable. Not all credit cards require an annual fee. It is worth shopping around to get the lowest fee or no-fee, especially if you pay off your balance each month.

Read each contract carefully before you sign so that you understand all the costs and conditions. Shop for a credit card the same way you would shop for any good or service. Try to negotiate for the options and conditions you want at the lowest cost available.