Research before choosing a credit card

by Peter Frost

For college students, credit cards are almost as essential as textbooks, tuition and takeout pizza. And unfortunately, all can eat up a big chunk of a checking account.
For every credit card user, finding the right card can help cut down on extra interest charges and headaches.
According to a recent study by SmartMoney magazine, more than 50 percent of its readers are using cards that charge more than 12 percent interest on outstanding balances and 17.5 percent of readers are paying 18 percent or more.
So instead of paying $100 for that new sweater, it’s more like paying $118 or more at an 18 percent annual percentage rate, or APR, if the balance is paid out slowly during the next year.
Don’t let those numbers scare you away from all plastic purchases. Credit cards, when used responsibly, are all about convenience, not interest rates and collection agencies. That’s why everybody has them.
The first thing to look when choosing a card is its APR.
Usually, a high APR is bad, and a low one is good. But for some people, especially those who make a habit of paying off their debts in full every month, APRs don’t matter.
If all balances on credit cards are paid before the bill’s due date, no extra fees have to be paid at all. This is the philosophy that the traditional American Express cards are built around: Bills must be paid in full every month.
If this is the route you’re going to take, just make sure the card has no annual fee. Some cards, like the American Express card, have fees of $70 or more.
Grace periods should also be looked at. A 25-day period is standard. It means that the sweater you purchased earlier today won’t start accruing interest until after the grace period.
If you don’t plan on paying your bill in full every month, or are planning on having some big purchases, it becomes more important to take a look at a card’s APR.
For people who habitually carry a heavy balance, the lower the APR the better. And when shopping for low APRs, make sure the rate advertised at the credit card booths isn’t just an “introductory rate” that lasts for six months or a year. Often times, after the trial period is up, the rate drastically increases, sometimes as much as 20 percent.
A card with a 12 percent APR or less is a great buy, but it’ll be tough to find. Something in the range of 15 percent APR to 18 percent APR will be easier to locate, however.
Closure costs, like yearly fees, should also be avoided if possible. Some credit cards will charge up to $50 just to close an account.
Also be wary of the credit card booths set up on campus. Many times the on-campus representatives get paid on a per-application basis, so they are often less concerned that students have all the information they need to know before making a decision.