The best advice anyone can give you on credit card fees and APRs is that the easiest way to save money is not to owe money. The conditions in today’s market also mean that you can find a credit card that matches the way you spend. If you maintain a balance constantly, it makes more sense to find a card with a low APR, whereas if you pay your balance off monthly, a higher APR with fewer holding fees is a better choice.
If You Hold a Balance
No one needs to tell you that holding a balance on a credit card is poor money management. Still, most Americans do so regularly. For those, the best credit cards are those that have the lowest APR. If you have a good credit rating, you should be able to contact your credit card company and ask for a decrease in rate. Dropping even a few points saves you a great deal of money over the course of the years. (Click Here for a step by step guide in how you can decrease your credit card interest rate)
It is also advisable that if you have any savings to use at least some of it to pay off any credit card debt. Even the best online savings accounts are only paying between 1-2% in interest currently. When compared to paying 9-22% interest on a credit card you can clearly see why you would want to pay off debt first.
Another option is to take a home equity loan, if you own your home. The catch here is that you are putting your home at risk if you can’t repay the loan. The benefit, other than the usually lower interest rate, is that you can deduct the interest you are paying on a home equity loan from your taxes, something you can’t do with credit card interest.
Getting 0% balance transfer credit cards is also a great way to reduce your debt, find out more via the link.
If You Pay Your Balance Each Month
In this case the interest rate is irrelevant. You pay your balance monthly and you don’t accrue any interest charges. Here it makes the best sense to search for a card that offers a no fee option. Some cards want you to pay them for usage, usually annually. These are the charges you want eliminated by just avoiding them all together. Even so, ask for a better rate, if you do end up carrying a balance from time to time on an especially expensive item, it will cost less in interest.
- Never pay late. With some cards, even one late payment moves you out of the prime interest rates and into higher ones. If you are going to miss your cut off date, call the company and let them know that the money is on the way; often that will forestall changes in interest rates.
- Avoid fees. Over limit fees, late payment fees, transfer fees and cash advance fees are exorbitant and they add up quickly. If you have ever accidentally overdrawn at the bank, you know what I mean. A simple overdraft of a few dollars suddenly balloons into several hundred. Cash advances usually come with exceptionally high interest rates too, so avoid them if you can.
Read the Terms and Shop Around
The credit card business is just that, a business. They want you to do business with them and prefer that you are the kind of client that carries a balance. Shop around to find the best terms for your needs. Most contracts are only a page or two, so make sure you read them.
While most people need to have a credit card for emergency purposes, it still pays to evaluate those credit card fees and APRs before signing on the little line.
This is yet another post from the How to Save Money on Everything ebook. It’s free for all newsletter readers so go get your free copy now by clicking here.