General Notes

When choosing a credit card there are a number of factors to be taken into account. If you are not planning to pay off the outstanding amount each month then the most important factor will probably be the interest rate charged.

Below is a list of interest rate issues which should be considered when choosing a card.

• introductory rates: many credit card providers are now offering introductory rates to attract new customers. The introductory rate can be as low as 0% and the introductory period ranges from a couple of months to a year.
  
  When an introductory rate is quoted by a credit card provider, check the following:
  
  
  • how long does the introductory period last? Is it until a specified date or for a set period after you receive the card? Offers that specify a date can be deceptive as it takes time to receive the card and transfer the balance, eating up a chunk of the low interest period.
  
  
  
  • what does the introductory rate relate to? Is it for transferred balances only, new purchases only or both?
  
  
  
  • what will the interest rate be after the introductory period?
  
  
  
  If you are organised, it is possible to 'surf' the cards. In other words, you can transfer your balance from one card to the next in order to benefit from each card's introductory rate.
  
  
• usual interest rate: what is the rate of interest charged following any introductory rate? Interest rates vary dramatically. As at June 2001, the standard APR (Annual Percentage Rate) on offer varies from 8% to 29.8%.



• interest free period: does the card offer an interest free period? Most cards only charge interest from the statement date. Others calculate interest from the date of the transactions you make. What is the maximum interest free period? In most cases this is 56 days.
  
  
• cash withdrawals: the interest rate charged for 'cash advances' is normally far higher than the rate that applies to new purchases or transfers. If you tend to use your credit card for cash advances, what interest rate will be charged?
  
  Also, bear in mind that interest is charged from the date of the cash advance. No interest free period applies for cash advances, otherwise you would be able to borrow interest free indefinitely by using two cards and withdrawing cash on one to pay the other each month!
  
  
• balance transfers: most credit cards allow you to transfer a balance from one or more other credit cards. What is the interest rate applied to these balance transfers following any introductory period? You should only transfer a balance if it means you will pay less interest.