Q: How do I decide which credit card to get? I have received a number of solicitations in the mail, but the cards all offer different interest rates and annual fees, and each seems to have its own advantages and disadvantages.
A: Credit card fees run the entire gamut from no fees to well over $50 a year, while interest charges currently vary from 6.4 percent to more than 20 percent.
Which card to get depends on the way you expect to use it. If youuse your credit card for many different purchases (food, clothing, cosmetics and travel), I recommend that you stick with one of the major cards like Visa, MasterCard or Discover. If you usually pay the bill on time and within the allowable grace period, then the interest rate is of little consequence. The most important factor is the annual fee. Shop around, and don't forget your own bank. A growing number of banks offer no-fee credit cards for clients who maintain minimum deposits.
On the other hand, if you frequently use the credit facility of the card, making only minimum payments or leaving outstanding unpaid balances, then the interest rate becomes the dominant factor in your decision. For the lowest rates or no-fee cards, you may have to go out of state. Most merchants don't care if a credit card is issued by an out-of-state bank. A Visa card is a Visa card, whether it was issued by a large bank, a small bank or even a brokerage firm.
One word of caution: Read the fine print! The Truth in Lending Act requires lenders to express interest rates in a standard measure -- the annual percentage rate (APR). But it does not define the "amount outstanding" on which this interest is charged. A growing number of banks charge interest using various "previous balance" methods.
In many cases, the entire previous balance, in addition to any new charges, is subject to interest charges, even if part of the balance was paid off. Other banks may charge interest on the average purchase balance, if any balance at all remains in the account. These methods can greatly increase your interest costs beyond the stated interest rate.
Bankcard Holders of America is now offering its 1995 Low Rate/No Fee credit card list, featuring 47 banks offering credit cards with interest rates as low as 6.4 percent and banks issuing cards with no annual fees. To order the Low Rate/No Fee list, send a check or money order for $4 to: Bankcard Holders of America, 524 Branch Dr., Salem, Va. 24153.
One final reminder: If you qualify for a low-rate credit card, you might want to transfer your high-rate balances to your new low-rate card. It could save you a lot of money.
Susan Bondy founded her namesake financial services company 1980 to provide financial planning and asset management. Write to Susan Bondy in care of The Sun, 501 N. Calvert St., Baltimore, Md. 21278. All letters will be treated confidentially.