What would you say if you were asked “What do you look for when choosing a credit card?” Most people say they look for a competitive interest rate on purchases or are swayed by the type of rewards they offer. Though those are two important things to look for, there are a couple other key features that shouldn’t be ignored.
Rewards versus lower rates
The first thing most consumers think of when looking at a credit card is either rewards or rates. Depending on how you use your card, one is usually better than the other for your situation. If you are a cardholder who keeps a balance on your card month to month, then your first priority should be a lower interest rate. If you use your card often and pay down the balance each month, then rewards offered for card usage may make more sense.
Though rewards and lower rates are important, understanding the rate structure on potential cards is equally, if not more, important. Are there annual fees? There are premium reward cards available, but they often come with a hefty annual fee. Are there penalty fees for late payments? Not many people like to read the boring disclosure box on the back of the card application, but it is extremely important that you do and fully understand the card you are considering.
A feature that many people don’t think about when choosing a card is easy account management. Though a credit card is one of the most widely used financial services, amazingly ease of doing business with your card provider is often overlooked. It’s important that the card provider you choose is easy to get a hold of in case of emergencies, has intuitive online and mobile account management and offers some sort of alert system to notify you when your card has been used, is close to it’s limit, and when a payment is due.
Many cards offer other perks when you use your card. This includes auto rental coverage, travel insurance (for the trip itself or lost luggage), extended warranty on products purchased, emergency assistance (auto, legal, travel) and more. If you are basing your card decision on any of these additional perks, be sure to get a copy of the disclosure to review. Most of these perks aren’t all inclusive and many times have additional qualifications to use them. Perks are great, but only when you understand how they work.
Because credit cards are so widely used and there are so many cards available, it is important to be sure you review each of these attributes and fully understand the card you are applying for. It can even be a good idea to review them for the card you currently have and use.