Maria will be graduating from CalTech soon. She managed to keep a 4.0 through the whole four years she’s been there. She has a job lined up at NASA’s Jet Propulsion Lab where she’ll make megabucks specializing in fuel combustion. Her credit history is limited to the loan she took out for the clunker that got her through school—which has about gasped its last breath—plus a Macy’s Card. To better establish her credit (in the hopes of getting a better mortgage rate when she buys her first house a few years from now), she decides to go plunge into the labyrinth of credit cards.
Maria maps out that she’ll use the card for as many purchase as she can to earn cash-back rewards and that she’ll pay the entire bill each month.
She’s gotten several offers in the mail recently, some for cash-back cards, and some with no interest for the 18 months, and others for low rates for balance transfers. Looking them over she puts together a list of things she needs to compare about the different offers:
• What’s the interest rate (APR)? Some of the offers were a little tricky because they listed several rates, but wouldn’t tell her which one she’d get until she applied. She used the highest rate for comparing cards because she figured the lowest rate in the offer was for people with really good, long standing credit scores and she is new to the game.
o Is there an introductory rate?
o How long does it last?
o And what types of purchases does the intro rate apply to. Sometimes intro rates don’t apply to certain types of purchases.
o What’s the ongoing rate after that ?
o Is it a fixed-rate or variable? Maria would rather have a fixed-rate so she doesn’t get unexpected increases. Variable rates are usually a little lower but can climb faster.
o What are all possible reasons the offer lists for why her rate might go up?
• Is there an annual fee to get the card? Lots of the offers she looked at had no annual fee the first year so she was careful to compare the fees for following years.
• What are all the fees they charge? Like cash advance fees, late-payment fees, or even though Maria’s not transferring a balance, what’re the balance-transfer fees? On some offers, in the fine print she noticed they would charge her a fee to use her rewards points.
• What is the credit limit? She wants a fairly high limit because she wants to make most of her purchases with the card to the most points.
• How long does Maria have to pay her bill after she receives it? (aka the grace period)
• What’s the penalty if she’s late with her payment? Is there a penalty APR? An offer is supposed to tell you what the penalty rate is, what triggers it, and how long it would last.
• Is there a limit of what she’d have to pay if someone steals her card?