Credit Cards on the Rise Again

During the most recent economic recession, consumers defaulted on their credit cards in record numbers, resulting in card issuers taking a less aggressive approach to finding new customers. Now that the economy is on the rebound, banks that issue Visa, MasterCard, American Express and the like are back with new ways to try to win a loyal customer base. They have resumed mass mailings and other marketing efforts in an effort to woo people back to using credit cards, especially consumers who have good credit ratings.

New Tempting Offers

Credit card issuers have a more challenging task ahead of them than ever before, since the recession forced people to cut back on their spending and re-evaluate habits that got them into debt. As a result, issuers are coming out with tempting offers such as earning cash back on every purchase, free airline miles and other perks. Creditors have also had to adjust to new laws aimed at protecting consumers, which limited the amount they could charge for late fees and interest rates.

To make up for lost time, the competition between credit card issuers has become intense, with the result being more consumers who get a good deal. However, financial advisers urge consumers to exercise caution and evaluate several factors before jumping head first into credit card debt. The following are some of the most important issues for consumers to consider when deciding which credit card is best for them.

Consumers Urged to Pay off Balances Each Month

In an ideal world, a credit card would only be used as a convenience and the consumer would have the funds available to pay the balance in full each month. People who are able to do this should consider getting a rewards card rather than a charge card. A rewards card is more likely to offer store discounts, cash back and other benefits than a charge card does. Since the balance is paid in full each month, consumers don't need to worry about the annual percentage rate. For those consumers who do carry a balance month to month, a low-interest card would be best.

Always Read the Entire Agreement

It sounds obvious to advise consumers to read the fine print before agreeing to accept a credit card, but a large percentage of people do not take the time to do this and then are surprised with unexpected fees later. For example, a card that advertises a very low interest rate may double that rate if a consumer is even one day late with a payment.

Some credit card companies present information in such a way that it can easily be misunderstood. In an effort to entice people to transfer balances to their own credit card, banks can overplay the low interest rate and downplay that there is a limit enforced on the amount transferred or a fee charged to make the transfer. Before accepting any new card, consumers should sit down and figure out exactly how much it will cost them over the course of the next year.

Jessica Bosari writes about personal finance topics for several websites including TermLifeInsuranceNews.com. The site seeks to inform consumers so they can make smart decisions when asking, “What is Life Insurance?” and “How Can I Get the Best Rate?”