Credit – Reduce the Costs, Part 2

In terms of credit cards, you ideally want to find cards that offer a low annual percentage rate (APR), you’ll see cards offering an APR of 7 percent or lower and cards offering an APR upwards of 30 percent, no annual fee, a low introductory rate, a special low balance transfer rate (if you plan to utilize this), no account activation fee, and some type of reward or cash back for using the card. There are several web sites you can visit to help you comparison shop for the best credit card deals, then apply for the cards that make the most sense for you. Remember, applying for too many credit cards too quickly can hurt you in the eyes of the credit reporting agencies and decrease your chances for approval. Applying for one new card every six to 12 months (or longer), and keeping each account current is important.

If you already have accumulated a large credit card debt using high-interest credit cards, consider some type of consolidation loan and develop a financial plan that keeps you from relying on credit cards for future purchases or to cover your everyday living expenses.

When you’re in the market for a major appliance, expensive consumer electronics, jewelry, or some other high-ticket item, think twice before applying for a store credit card. Many retailers entice customers with a special introductory rate if they apply for and ultimately use a new store credit card account to finance a large purchase. The problem is, if you read the fine print in the Card Holder Agreement provided by the lender or card issuer, that special offer isn’t always so special. If you’re offered one year of interest-free financing, what happens on the 366th day? What will the interest rate be then? Will the interest that accrued over that first year be added to the balance due? What additional finance charges and fees will apply? You’ll often discover that what seemed like an awesome deal can become an extremely high-interest loan after the initial special offer expires. It could make more sense to make the purchase using a low-interest credit card as opposed to a store credit card. If, however, you plan to pay off the entire purchase within the time period when zero percent interest and no finance charges are being charged, applying for that store credit card could make sense, providing the additional inquiry, new credit card account, and the added balance won’t impact your credit score too negatively.

Financing a new or used car is another opportunity to save money, if you shop around for the best possible deals. If you complete a car loan application at a new or used car dealership, they’ll typically shop the application to a variety of lenders, based on your credit score. The dealer might not always find you the best deal, however, especially if your credit score is below average. In addition to shopping for a loan through dealerships, visit a few different banks and credit unions, plus see what rates are available from lenders online. If your credit score is extremely low, you could potentially save a fortune in interest charges if you have someone with good credit co-sign the loan. Remember, during a 30- to 45-day period, you can have an unlimited number of inquiries on your credit report from car loan lenders, so shopping around won’t hurt your credit score. When negotiating with a car dealership over the financing terms for your car, there’s almost always room for negotiation.