The first step to avoiding bad credit is choosing your credit card provider carefully. Some credit card companies offer better rates and rewards than others. All these offers and rewards make it easier for people to manage and repay their debts.
Before you choose a credit card, here are some tips to help you compare credit card rates, processing fees and reward programs so that you can select the company with the most suitable offer. Also, you would be able to avoid credit card companies with hidden fees or shady practices that may have adverse effect on the user.
How to Compare Credit Card Interest Rates, Processing Fees and Reward Programs
1. Interest Rates
The interest rate you pay on your credit card is known as the APR- Annual Percentage Rate. Your APR is supposed to be your monthly interest rate multiplied by the number of months in a year (twelve) however; this is not always the case. Credit card companies charge different rates for different conditions. For instance, they may offer you very low introductory rates which would change after sometime.
Some credit card companies offer as low as 1.5 – 2.0% introductory for the first six months and when the period has lapsed, the rate may go up to as much as 12 -15%. Therefore, it is important for you to know how much the credit card company charges as its interest rate. Don’t get too carried away with the introductory offer. You can find out from people who use the same credit card because some credit card companies would not reveal their interest rates to you during the introductory period.
Another interest rate you have to get a good grip on is the rates charged for cash advances. Credit card companies most of the time, charge a higher interest rate for cash advances; you would also want to find out what this rate would be before you select a credit card. Also, you may need to transfer the balance on a former credit card to a new account. This mostly happens when people feel like they can get lower rates on a new credit card account but sometimes, they end up paying more because the new credit card company would charge for balance transfers. Before you decide to transfer your credit card balance to a new account, ensure that you find out what the rates would be and then calculate it and decide whether it’s a good deal altogether.
Another thing to figure out is whether the company charges fixed or variable interest rates. It is important for you to know what the company charges on top of the prime rates and its interest rates change policy. You should also find out the grace period the company offers. It is always good to go with a credit card company that offers a longer grace period (with no other hidden charges or penalties). That way, it makes it easier for you to meet up with some financial obligations without having to pay interests.
2. Processing Fees
This is especially important for merchant accounts. A business owner should be very concerned with credit card processing fees because it increases business expenses. Before you choose a merchant account provider for your business, you should consider the following factors as a tools for comparing processing fees so that you can select a provider that offers budget-friendly rates.
- Set-up Fees-: When you want to get a merchant account, you have to apply for it and pay some set-up fees. These are one-time charges and may not be as important as the monthly charges but it wouldn’t hurt to get a credit card company that is willing to waive these fees. Find out if there are any good credit card companies that charge little or no initial set-up fees.
- Discounts-: For every credit transaction, the merchant account provider would charge you a certain fee. This is how the company compensates itself for the service it renders to you. Some merchant account providers offer discounts such that what they charge you on every transaction becomes lower. You should find out what the company’s base rate is and its discount policy before you choose. You should also find out what it charges for high-risk transactions like internet purchases especially if the nature of your business is such that involves a lot of high-risk transactions.
- Base Rate-: You should also find out the exact rate the company charges per transaction. This is usually a flat rate and the lower the rate, the better for your business.
- Other fees-: You should also find out if you would be required to pay any other fees like account maintenance fees or any other standard charges.
- Equipment Fees-: You should also find out what it would cost you to obtain credit card processing equipment from your merchant account provider. You would need the right equipment to be able to process credit cards and these equipments usually don’t come cheap. But some companies offer them to their customers for free while some others allow their customers to pay for it in monthly installments. If you are able to find a service provider that would give you processing equipment for free or allow you to pay back in installments; you should go for that.
- Good Services-: It’s not all about the monetary value sometimes, you also have to find out if you would be receiving the right value for your money as well as the necessary customer service and attention your business needs before committing to a credit card merchant account provider.
This is also very important. I haven’t come across anyone who doesn’t like rewards, discounts and freebies and considering how hard it is to make money, getting a credit card that offers you rewards from time to time is not a bad idea.
However, you must understand that reward credit cards are not for everyone. You must first determine what is more important to you; low interest rates or rewards? Because most of the time, you cannot have both. Find out what your credit card needs are before choosing a credit card type. If you are not a frequent traveler for instance, you have no business using a travel reward credit card. You can look out for online tools that allow you compare credit cards automatically. A common one which people use is ‘Bankrate’