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Oscar Dominguez: Choosing the best credit card to fit your needs

Union Bank

Posted: August 21, 2009 8:45 p.m.
Updated: August 22, 2009 4:55 a.m.
Whether you've just received your first credit card offer or are looking to add an additional credit card to your wallet, there are some key factors to consider when choosing the best credit card to meet your needs.

While it may be tempting to open an account as soon as you receive an application, it is important to read credit card literature thoroughly and be selective. Keep in mind that each credit card company you apply with may access and review your credit report and score, and a large number of applications may negatively affect your credit score.

The Federal Reserve Board provides a number of factors consumers may consider when choosing a credit card. These include:

n Purpose of the card. Depending on how you plan to utilize a credit card-for cash advances, regular purchases or fund transfers-it may be wise to research the terms and conditions that apply to your intended use. For example, if you plan to use a card for regular purchases and plan to pay a portion of the balance owed each month, a card that offers a lower annual percentage rate - the yearly cost of credit - would be a key consideration.

n Annual percentage rates (APRs). It is important to review the APRs on a credit card before you apply. A single credit card may contain a few different APRs for different uses. Regular purchases, for example, typically have lower APRs than cash advances or fund transfers. APRs may also differ depending on the balance owed, with a higher APR applying to higher balances. APRs may also come in different forms, such as "fixed" or "variable" rate APRs, and may change after an initial "introductory period."

n Credit card fees. When reviewing a credit card application, determine the fees associated with the card. Some credit cards may charge an annual fee for the card and have a variety of fees for different uses such as cash advances, balance transfers, late payments and credit-limit increases.

n Finance charges. Credit card issuers may calculate finance charges-the dollar cost of using credit including interest, transaction and late fees-differently. One credit card issuer may compute the finance charge based on the monthly balance and another on the average daily balance. Keep in mind that the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 prohibits double cycle billing-when interest charges are calculated based on balances from previous cycles as opposed to the current billing cycle. Many of the consumer protections included in the CARD Act are slated to take effect February 2010.

n Credit limit. Depending on your specific needs, review the credit limit offered on the credit card you are considering. Keep in mind that in order to limit your debt-to-credit available ratio, you should refrain from using more than 30 percent of your available credit, as a higher percentage of debt can negatively impact your score.

n Perks. Consider the bonus features provided with a credit card. If you are a frequent traveler, for example, a credit card that offers frequent flier miles, travel insurance or car rental insurance may play an important role in your credit card selection process.
When selecting a credit card, carefully weigh each of the above factors.

Oscar Dominguez is vice president and branch manager of the Stevenson Ranch branch of Union Bank, located at 25954 The Old Road and the Valencia Bank & Trust branch, located at 23620 Lyons Avenue. His column reflects his own opinions and not necessarily those of The Signal.


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