Everything ElseWritten by Jason Ubay On 12 October 2011
Have a goal when choosing a credit card deal

This is guest blog post from Shirley Ikehara, a financial advisor for Ameriprise Financial Services, Inc. She can be reached at (808) 792-7409 and shirley.m.ikehara@ampf.com.

The Key to Your Best Credit Card Deal? Have a goal.

The stacks of credit card offers in your mailbox haven’t been bigger lately just because banks have regained their appetite for lending — they’ve also sweetened their introductory rates and have started offering more kinds of rewards. To make sure you get the best of them, spend some time comparing offers with the following ideas in mind.

The right introduction. The greatest draw in a card’s offer is its introductory interest rate, and in the last year competition has driven banks to offer their best deals yet: some have extended their zero Annual Percentage Rate (APR) from one year up to 20 months. But the deals aren’t always so simple: some cards apply that introductory rate to balances transferred from other cards while others apply it only to purchases made on the new card. For others, the rate can change after certain periods of time have elapsed.

Choosing the right card requires you to have a clear goal in mind when comparison shopping. Do you want to roll over a balance from your current card to get better terms for repaying short-term debt? Then you should look for a card with the longest introductory period for balance transfers. Have you planned a big purchase you can pay off before (or soon after) the introductory period? Make sure that zero percent APR period applies to new purchases.

Also remember that an introductory period is just that — introductory. Afterward your card could jump to a rate higher than 20 percent. With the help of an online calculator, estimate the interest you could pay based on the balance you plan on holding after the honeymoon period. Which saves you the most money?

Rewards are not reasons. Keeping your goal in mind is especially important when you consider the different rewards each card offers. While beneficial, the perks — ranging from airline miles to cash back rewards to, yes, a prestigious-sounding name — should not be the reason you get a card and are definitely not worth the consequences of adding to your debt load.

If you don’t carry a monthly balance, though, the right rewards can be a nice way to earn money from purchases you routinely make. When in doubt, go for a cash-back program. The reward is more transparent than abstract point-based systems.

Compare the comparisons. There are dozens of sites dedicated to comparing credit cards, some of which only list cards that advertise with them. To make sure you get a full range of comparison, check several sites. That way you’ll get a balanced picture and a chance to see exclusive offers from several different companies.

Check your wallet. A recent MasterCard study found that 55 percent of consumers are not familiar with the benefits their credit card offers. Some of the items we’re missing out on are significant: automatic extended warranties, replacement of stolen purchases and discounts on rental car insurance and roadside services. Review the terms of your card with the issuer to see what you might be missing out on before you spring for a new card that may have the same (or fewer) benefits.

It’s also worth calling your card issuer to see if you can get a better rate on your current card. Under the 2009 federal CARD Act, banks are obligated to reassess your interest rate if your credit warrants it. If you don’t want to roll over a balance or make a large purchase on low introductory terms, the best option for lowering your monthly payments may be to skip a new card and bring the rate down on your existing ones.

Just for you. Because they have lots of different audiences in mind, card companies typically make “one size fits all” offers when they advertise on TV or online. While there may be a stigma to responding to solicitation by mail, preapproved offers sent to your home are already customized based on your credit profile and are likely to be a better deal. So, before applying in response to an ad, recheck that stack of envelopes.

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Managing Editor, Hawaii Business magazine. He's also representing the mag on Facebook and Twitter at @hawaiibusiness. You can follow him on Twitter at @jubay.

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