Like dandelions in a spring lawn, credit card offers pop up everywhere–stuffing your mailbox, flashing on the Internet, even falling from the magazines in your doctor’s waiting room. And they all sound so attractive. “0% APR until next year!” “No fee if you transfer a balance now!” “Low fixed rate!” You’re thinking of applying for a card, but how do you decide which offer is best for you?

Credit cards can be useful in helping you monitor how much you spend, but they can also lead you to spend more than you can afford. Before accepting a credit card offer, evaluate it carefully by doing the following:

  • Read the terms and conditions closely
  • Know what the interest rate is and how it is calculated
  • Understand hidden fees such as late-payment charges and over-limit fees
  • Look for rewards and/or incentive programs that will be most beneficial to you

Contact the credit card issuer if you have questions about the language used in an offer. And if you are trying to decide between two or more credit card offers, be sure to evaluate them to determine which will work best for you.

Learn the lingo

In order to evaluate credit card offers, you’ll need to learn the language they use. Here are some of the more important terms.

Annual percentage rate (APR): the cost of credit as indicated by a yearly (fixed or variable) interest rate. This rate and the periodic rate (the APR expressed as a daily or monthly factor) must be disclosed to you before you become obligated on the card.

Balance computation method: the formula used to determine the outstanding balance on which you’re charged interest for the billing period.
Finance charge: the cost of credit for the billing cycle, expressed as a dollar amount and determined by multiplying the outstanding balance by the periodic rate.
Fees: charges (other than the finance charge) that may be levied against your account. Common examples include an annual fee, cash advance fees, balance transfer fees, late payment fees, and over-the-limit fees.

Grace period: the length of time prior to your payment due date during which you may pay off your account without incurring any finance charge.

Bear in mind that your credit card use affects your credit score. Avoid overspending by setting a balance that you’re able to pay off fully each month. That way, you can safely build credit while being financially responsible. Take into account that missed payments of any sort can cause your credit score to suffer. In turn, this could make it more difficult and expensive to borrow money later.

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