How to choose a Credit Card
By: Jennifer Tarzian
There are literally thousands of credit cards out there to
choose from. You receive offers in the mail, in your email, over
the phone, and on the websites you surf to on the Internet. We are
inundated with credit offers, but are all credit card offers worth
taking? The answer is a definite no. There are many things about
accepting the offer of a credit card you need to know.
How do I know which credit card offers to accept and which ones I
should stay away from? Is one of the most common questions we get
at http://www.youngparentsmagazine.com , says Jennifer Tarzian.
People want to know how to choose a credit card wisely.
If there is one thing consumer advocates and the banking industry
do agree on, it is that the abundance of convenient credit gets a
lot of people in trouble because they are financially uninformed.
Financial education is not subsidized by the credit card industry,
but is included in a the most recent version of the Bankruptcy
Reform Act.
That bill, which has been stalled for years, would make it much
harder for consumers to shed their unsecured credit card debt when
they go into bankruptcy. It would also require both credit
counseling prior to filing for bankruptcy, and post-bankruptcy
instructional courses on personal financial management as a
condition to discharge debt.
So the only financial education available comes way too late, since
youre already in trouble when they offer it. All this means we have
to be even more careful when choosing which credit cards to sign up
for.
Credit card issuers are often accused of tempting consumers into
carrying more debt than their income justifies. Then, when the
customer is drowning in debt -- stumbling to make even the minimum
payment -- they will pile on late fees, jack up interest rates and
begin what often becomes a crescendo of collection calls.
How do I avoid that? Choosing which credit cards you accept is just
as important as how you use the credit cards you do accept. The
rest of this article will focus on choosing credit cards wisely. To
find out more about how to keep your credit score high and use
credit cards wisely, go to
http://creditcards.youngparentsmagazine.com , where Jennifer
Tarzian can help you.
Do You Know What You Can Afford?
Credit card mailings can be tempting, offering teaser rates,
rebates, and rewards. Its up to you to figure out whether you are
financially stable enough to accept them. According to Tamara
Draut, Director of the Economic Opportunity Program at the
nonpartisan public policy organization Demos. "When consumers are
extended credit, they think it's because the banks see them as
being capable of borrowing, while it very well may be that they are
not financially prepared to take on additional debt."
"People say, if I can't afford it, why was I offered credit," says
Jim Tehan, spokesman for Myvesta, a nonprofit consumer education
organization. Tehan says that credit card issuers target consumers
based on data-mining technology that can only give one part of the
picture. "They don't know what consumers can afford -- only a
consumer can say what they can truly afford."
But banking industry veteran Walter Wriston, former CEO of
Citigroup/Citibank, argues that credit card issuers shouldn't be
the ones deciding who can afford what. "Should we say to somebody,
say, you're 21 years old: 'You can carry a rifle and fight our war.
You can vote in a presidential election. But, unfortunately, you're
not smart enough to know how much money to borrow?'"
That means, its up to you. You decide whether or not you can afford
to have more credit or not. Look at the credit cards and loans you
now have. What is your total credit limit including all of your
credit cards, loans, and accounts? What is your total debt owed to
those credit cards, loans, and accounts? These are all things you
should think over before you fill out that credit card
application.
Comparing Credit Card Offers;
Many people still carry credit cards with annual percentage rates
(APRs) of 13% or higher. After all, there's a whole industry of
card issuers out there devoted to using hidden fees and interest
rate gymnastics to gouge you as best they can. Consider this:
According to Gerri Detweiler, author of The Ultimate Credit
Handbook, some credit card companies are actually trying to get rid
of card holders who pay off their balances each month. "The card
issuer might try to move you to a card with an annual fee or a
debit card," she says.
The key to getting a better credit card deal is figuring out how
much a given card really costs you. You've probably gotten a stack
of card offers in the mail over the past week, each sounding
cheaper than the next. Just plug in a few numbers, and our analyzer
will calculate the true cost or net interest rate of each one so
you can compare them side by side.
And if you're looking for a specific type of card one that, say,
gives you airline mileage or no annual fee check out our credit
card rate center and pick out those that best fit your needs. Go to
http://www.bankrate.com/smm/rate/cc_home.asp?web=smm and use the
calculator there. Compare the offers you get in the mail to all
credit cards.
I hope you find this tool and the information we provided here
useful. Our goal at http://creditcards.youngparentsmagazine.com is
to provide young parents and others how to choose credit cards
wisely, how to reduce credit card debt, how to improve their credit
score, and how to stay financially healthy in general.
For more information about how to obtain credit cards, get credit reports, reduce credit card debt, or prevent Identity Theft, go to creditcards.youngparentsmagazine.com Jennifer Tarzian also has a lot of information at www.youngparentsmagazine.com for young parents you can use. Chris McElroy has been an advocate for consumer rights on the Internet since 1995 and also runs a missing childrens organization at www.kidsearchnetwork.org
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