How to Understand Credit Card Rates & Offers

Credit and debt management is an essential skill in your personal financial life, a skill that goes hand-in-hand with understanding what's in a credit card agreement. If you open a credit card account without reviewing the terms and conditions, you may suffer the blow of surprisingly high rates or unknown charges. When you receive credit card offers in the mail or online, the most important step is to do your homework. When you do choose the card that meets your needs, you can apply for it with confidence and celebrate your initiative to build your credit.

• 1

  Familiarize yourself with terminology. Annual fees or membership fees denote a certain amount you pay regularly (every month, year, or other) to keep your card active. Transaction fees are what you're charged when you withdraw cash from your credit card, make a late payment, or exceed your balance. Annual Percentage Rate, or APR, is the cost of the credit line---in other words, how much you pay in interest. Fees may also be charged for transferring a balance from an old card to a new card.

• 2

  Go online or call the credit card company if you've been offered a credit card and would like to know more. Sometimes credit offers will include sample rates in the advertisement that are much more desirable than the ones you will actually receive. Fortunately, you can often get a more accurate idea of what your rates will be by providing your financial information to the company over the Internet or phone.

• 3

  Before you apply for a card, read your credit card agreement. A table will list all rates: APRs, rates for balance transfers, cash advances, etc. You should choose a card that suits your personal needs. If you're using the card for purchases only, look for one with a low APR. If you're transferring a previous balance to the new card, look for one with low balance transfer fees.

• 4

  Shop around. Compare multiple offers with one another, and always read the fine print. Some cards may seem fantastic---zero percent APR for a year, for example---when in reality, once the promotion is over, the APR may skyrocket.

• 5

  Practice good credit management. This will directly affect your rates on future credit cards, loans, and mortgages. The better job you do of managing credit, the more access you'll have to higher lines of credit and lower interest rates.