Questions to Consider Before Getting Your Next Credit Card

July 31 2018

What’s the APR?

Understanding interest rates and doing the actual calculation of those rates is the only way to understand credit cards. CC companies can hide their fee’s in the monthly payment so the consumer never knows how bad the interest is. For example, a 20% APR credit card will charge you over $83 dollars per month in interest on $5,000 of debt.¬†

Is the fee worth it?

Annual fees on credit cards aren’t actually a bad thing. As with all companies, there are winners and losers and the fee is a credit card company’s way of ensuring that you are using their card instead of competitors. If you do use it though, the benefits can greatly outweigh the cost which makes the consumer the real winner.

What is My Credit Limit?

Unfortunately,¬†this one is tough to ask without actually applying for the card first, but it doesn’t make it any less important. A big part of your credit score is utilization ratio, which is your debt divided by the amount of credit you have available. If you’re spending $500 of your $1000 limit every month then all the credit card company will see if a 50% utilization ratio. Compare that to spending $500 on a $10,000 available limit and the ratio drops all the way to 5%. This one comes with a warning though as great power comes with great responsibility. Make sure you’re never spending more than you should – even if you have a higher limit!