Shopping around for a credit card can certainly save you money on interest and fees. You’ll want to find one with features that match your needs. This information can help you:
- Understand the available features of credit cards.
- Compare credit card features, offers and costs.
- Know your rights when using your credit card.
- File a complaint should you have a problem with your credit card

Using Your Credit Card

The first step in choosing a credit card is thinking about how you will use it. If you expect to always pay your monthly balance in full, your best choice may be a card that has no annual fee and offers a longer grace period. If you plan to sometimes carry over a balance from month to month, it may make more sense for you to use a card that carries a lower interest rate (stated as an annual percentage rate, or APR). If you expect to use your card to get cash advances, you’ll want to look for a card that carries a lower APR and lower fees on cash advances. Some cards charge a higher APR for cash advances than for purchases.

APR

The annual percentage rate, or APR, is the interest rate you will pay if you carry over a balance, take out a cash advance, or transfer a balance from another card. The APR states the interest rate as a yearly rate.

Multiple APRs, A credit card may have several APRs:

- One APR for purchases, another APR for cash advances, and yet another for balance transfers. The APRs for cash advances and balance transfers often are higher than the APR for purchases. For example, 14% for purchases, 18% for cash advances, and 19% for balance transfers.
- Tiered APRs. Different rates are applied to differing levels of the outstanding balance. For example, 16% on balances of $1 to $500 and 17% on balances above $500.
- A penalty APR. If you’re late in making payments, the APR may increase. Your card agreement may say, for example, “If your payment arrives more than ten days late two times within a six-month period, the penalty rate will apply.”
- An introductory APR. A temporary APR for a stated time. A different rate will apply after the introductory rate expires.
- A delayed APR. A different rate will apply in the future. For example, a card may advertise that there is “no interest until next March.” Be sure to Look for the APR that will be in effect after March. Pay special attention to the APR. If you carry over a part of your balance from month to month, even a small difference in the APR can make a big difference in how much you will pay over a year.

Fixed vs. Variable APR

Some credit cards have a fixed rate, meaning the APR doesn’t change or doesn’t change often. The APR on a fixed rate credit card can change over time, but the credit card issueer must tell you before increasing the fixed APR. Other credit cards have a variable rate, meaning the APR changes from time to time. The rate is usually tied to another interest rate, such as the prime rate. If the other rate changes, the rate on your card may change as well. Look for information on the credit card application and in the credit card agreement to see how often your APR may change. The agreement is like a contract - it lists the terms and conditions for using your credit card.

Grace Period

The grace period is the number of days you have to pay your bill in full before a finance charge is introduced. For example, the credit card company may say that you have “25 days from the statement date, provided you paid your previous balance in full by the due date.” The statement date is given on the bill.

In most cases, the grace period applies only to new purchases. Most credit cards do not give a grace period for cash advances and balance transfers. Instead, interest charges start right away. You may not have a grace period for new purchases if you carried over any part of your balance from the preceding month. Instead, you may be charged interest as soon as you make a purchase (in addition to being charged interest on the earlier balance you have not paid off). Look on the credit card application for information about the method for computing the balance for purchases to see if new purchases are included or excluded. Information on methods of computing the balance can be found in the finance charge calculation section.

Finance Charge

The finance charge is the dollar amount you pay to use credit. The finance charge amount depends, in part, on your outstanding balance and the APR. Credit card companies use several methods to calculate the outstanding balance. Your outstanding balance may be calculated:
- Over one or two billing cycles, OR
- Using the adjusted balance, the average daily balance, or the previous balance, OR
- Including or excluding new purchases in the balance.

Depending on your carried balance and the timing of your purchases and payments, you’ll usually have a lower finance charge with one-cycle billing and either the average daily balance method excluding new purchases, the adjusted balance method, or the previous balance method.

Minimum finance charge

Some credit cards have a minimum finance charge, meaning you’ll be charged that minimum even if the calculated amount of your finance charge is less. For example, your finance charge may be calculated to be 35. But, if the company’s minimum finance charge is $1, you’ll pay that $. A minimum finance charge usually applies only when you must pay a finance charge, which is when you carry over a balance from one billing cycle to the next.

Credit Charge Fees

Most credit cards charge fees under certain circumstances:
- Annual fee (sometimes billed monthly). A fee charged for having the card.
- Cash advance fee. A fee charged when you use the card for a cash advance, which may be a flat fee (for example, $3) or a percentage of the cash advance (for example, 3%).
- Balance-transfer fee. Fee charged when you transfer a balance from another credit card. The credit card company may send you checks to pay off the other card. The balance is then transferred when you use one of these checks to pay the amount due on the other card.
- Late-payment fee. This is a fee that is charged if your payment is received after the due date.
- Over-the-credit-limit fee. Charged if you go over your credit limit.
- Credit-limit-increase fee. A fee charged if you ask for an increase in your credit limit.
- Set-up fee. Used when a new credit card account is opened.
- Return-item fee. Charged if you pay your bill by check, and that check is returned for non-sufficient funds (your check bounces).
- Other and miscellaneous fees. Some credit card companies charge a fee if you pay by telephone or to cover the costs of reporting to credit bureaus, reviewing your account, or providing other customer services. Be sure to read the information in your credit card agreement to see if there are other fees and charges.

Cash Advances

In addition to making purchases on credit, some credit cards let you borrow cash. Most credit card companies treat purchases and these cash advances differently. If you plan to use your card for cash advances, look for information about:

- Access. Most credit cards let you use an ATM to get a cash advance, or the company may send you checks that you can write to get the cash advance.
- APR. The APR for cash advances may be a higher rate than for purchases.
- Fees. In addition to the interest you will pay on the amount advanced, the credit card company may charge a fee for the transaction.
- Limits. Some credit cards limit cash advances to a certain dollar amount or a portion of your credit limit (for example, 50% of your available credit limit).
- How payments are credited. Many credit card companies apply your payments to purchases first, then to cash advances. Be sure to read your credit card agreement to learn how your payments will be credited.

Credit Limit

The credit limit is the maximum total amountyou may charge on your credit card. This includes purchases, cash advances, balance transfers, fees, and finance charges. If you go over this limit, you may have to pay an over the limit fee.

Types of Cards

Most credit card companies offer several types of cards:
- Secured card – requires a security deposit. The larger the security deposit, the higher the credit limit. Secured cards are usually offered to people who have limited credit records (those that are just starting out or who have had trouble with credit in the past).
- Regular cards – does not require a security deposit and has just a few features. Most regular cards have higher credit limits than secured cards, yet have lower credit limits than premium cards.
- Premium card - offers higher credit limits and usually has extra features such as product warranties, travel insurance, or emergency services. Often referred to a gold or a platinum credit card.

Incentives and Other Features

Many credit card companies offer incentives to use the card and other special features:
- Rebates (or money back) on the purchases you make.
- Additional warranty coverage for the items you purchase.
- Car rental insurance.
- Travel accident insurance or travel-related discounts.
- Frequent flier miles or phone-call minutes.
- Credit card registration (for help when a card is lost or stolen).

Liability Limits

If your credit card is lost or stolen and then is used by someone without your permission, you do not have to pay more than $50 of those charges. This protection is provided by the Truth in Lending Act. You do not need to buy credit card insurance to cover amounts over $50. If you do discover that your card is lost or stolen, report it immediately to your credit card company. The company will then cancel the card so that new purchases cannot be made with it. The company will also send you a new card for future use. For your safety, make a list of your account numbers and the company phone numbers. Keep that list in a safe place. Then if your wallet or purse is lost or stolen, you’ll have all the numbers in one place. Take that list of phone numbers – but not the account numbers - with you when you travel, just in case a card is lost or stolen.

Billing Errors

The Fair Credit Billing Act covers billing errors. Examples of billing errors are:
- A charge for something you didn’t buy.
- A bill for an amount that is different from the actual amount you charged.
- A charge for something that you didn’t accept when it was delivered.
- A charge for something that was not delivered according to agreement made at purchase.
- A charge by a person or party that does not have permission to use your credit card.
- Payments not credited to your account.

If you think your credit card bill has an error, be sure to take the following steps:

- Call the credit card company to alert them of the error. Also, write to the credit card company within 60 days after the statement date on the bill with the error. Use the address for billing inquiries listed on the bill. Tell the company your name and account number, that you believe the bill contains an error, and why you believe it’s wrong, and the date and amount of the disputed charge.
- Pay all the other balances on the bill. You do not have to pay the disputed amount or any minimum payments or finance charges that apply to it, but you are responsible for all other charges. If there is an error, you will not have to pay any finance charges on the disputed amount. Your account must be corrected.

If the credit card company finds that there was no error, the credit card company must send you an explanation and a statement of the amount you owe. Thia amount will include any finance charges or other charges that accumulated while you were questioning the bill.

Damaged Goods

The Fair Credit Billing Act allows you to withhold payment on any damaged or goods/services of poor quality purchased with a credit card. The sale must have been for more than $50 and must have taken place in your home state or within 100 miles of your home address. You should notify the credit card company in writing as soon as possible and explain why you are withholding your payment. Under the Fair Credit Billing Act, you may withhold the payment while the credit card company investigates your claim. If you pay the charges for the goods on your credit card bill before the dispute is resolved, you lose your right to make a claim.