The key to selecting an appropriate card is for consumers to decide how they will repay their debts. If you carry a balance most of the time, the most important feature to look for is a low interest rate. The larger the balance, the more important a lower interest rate becomes. With a $10,000 balance, interest would cost $2,000 on a card with a 20% annual percentage rate (APR) and $1,200 on a card with a 12% APR—an $800-a-year difference. Yet, ironically, consumers are sometimes more passionate about annual fees. They will change cards to save $10 or $20 a year on the fee, but not to save hundreds of dollars a year in interest.
Consumers who pay their balances monthly and never incur a finance charge should choose a card with no or low annual fee and a grace period. A grace period, the time during which a transaction does not accrue interest, may range from 0 to 30 days, with an average of 23 days. Convenience users who charge frequently and zealously avoid interest charges may consider enhancement cards.
Some cards offer substantial bonuses, particularly for those who charge $10,000 or more a year. Typical rewards include cash back, airline tickets, or free gas. However, for cardholders who carry a balance, enhancement cards can be expensive. Comparison shopping for credit cards is as important as shopping for a car or appliance because the credit card pricing structure (interest rate, grace period, fees) will be applied to every future purchase.
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