My colleague is thinking of getting another credit card. Smart that she is, she decided to review the credit card application again so she is assured that she understood everything. She does not want to end up getting bankrupt like her best friend who got into so much debt because of credit cards. More so, if she reviews her options, she can get the best product she could find by comparing offers from different companies.

What are the common terms you will probably come across in a credit card application? There is the Annual Percentage Rate that commonly appears written down as APR. It is basically cost of credit and represents interest you will be charged on any outstanding balance you have in your account. Companies vary in APR so you need to consider priorities when planning to get a new card. Some offer a low interest rate, but might charge higher in other finance costs. Those that offer rewards programs may cost you a higher APR. Ask yourself: what will work best for me if in case I need to carry over balances?

Then there is an option in your credit card application for a balance transfer. This offer is given for you to be able to transfer an existing balance to your new card. Let us say, you have found an offer that has a low APR, so naturally you would want to transfer balances that have high APR for you to save a little. Add to that, most programs with balance transfer options hold out on interest rates for a certain period of time; say six months to a year. Be wary though because sometimes the low APR only applies to transferred balances and not to new purchases. Balance transfer usually falls under the introductory offers that have fine prints – those that need your full attention. Make sure you understand the term or you might be surprised when one day your issuer charges you more all of a sudden.

Another thing to consider is the grace or free period. This is the number of days you are allowed to leave your balance unpaid and it will not incur an interest. Most companies allow from 20 to 30 days. Some cards do not have a grace period, so you will be charged right away upon purchase. This is an ugly truth, so better check what you are signing up for.

Thus, before signing that credit card application, read and be clever like my colleague so that you to be able to make the best choice!

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