Before the rewards, read the credit card’s price tag

Start with how you will repay

A card’s appeal depends partly on whether you expect to pay each statement in full or carry a balance. If borrowing is likely, compare the purchase annual percentage rate, or APR, before focusing on points. Rewards can be outweighed by interest and fees.

Use your ordinary spending and realistic repayment amount in the comparison. A welcome offer is a poor reason to buy things you would otherwise skip. Keep a copy of the offer and its conditions rather than relying on an advertisement’s headline.

Put the costs side by side

• Purchase APR: Is it variable, and what happens after any introductory period?
• Annual fee: What benefits would you genuinely use during the year?
• Transaction charges: Check balance-transfer, cash-advance, and foreign-transaction fees where relevant.
• Late-payment terms: Read the fees, payment deadline, and possible consequences.
• Promotional conditions: Identify the end date, eligible transactions, and rate afterward.

Understand the grace period

A purchase grace period can let you avoid interest when you meet its conditions and pay the balance in full by the due date. Most cards offer one for purchases, but it is not required. Carrying a balance can mean losing that benefit and owing interest on new purchases.

Cash advances generally begin accruing interest from the transaction date. Do not assume a card’s purchase grace period or introductory purchase offer also applies to cash advances or balance transfers.

Ask one practical question

“What would this card cost me if I paid in full, and what would it cost if repayment took longer?” Compare several cards under the same assumptions. The minimum payment is a required floor, so also examine the statement’s repayment information before choosing your monthly payment.