Credit ratings fall under four specific categories: poor, fair, good and excellent. While the scores and histories for each are somewhat debatable as to who qualifies for what, many consumers find themselves placed firmly in the “fair” category. In this arena, the consumer is eligible for better credit cards and loan terms than a poor credit counterpart is, but not quite at the level of being eligible for the best possible offerings like someone with a good or excellent credit rating. For these consumers, it’s important to remember that they are on the path to a better rating, if they take the right steps in credit card selection; choosing something commensurate with their credit rating, without overpaying in the process. To do this, only a few simple terms of the credit card contract need to be reviewed with a fine tooth comb.
Most credit card companies extending offers to fair credit consumers will have an accompanying annual fee attached. Fees range anywhere from $10 to $100 annually and is one of the first items that a consumer should review before signing a credit card contract. Select the card with the lowest or non-existent annual fee.
APR stands for annual percentage rate. As with an annual fee, these vary. Banks charge these fees when a consumer maintains a balance on the card, over 30 days. While a consumer with fair credit is not likely to get a zero percent APR, that doesn’t mean he cannot shop around for the lowest possible rate he is eligible for. However, “buyer beware” because many credit card agencies offer a low introductory rate that rises over a period of six months to a year that winds up being more expensive than a card with a higher initial APR. When selecting a credit card, look first, at your annual fee, and next at your annual percentage rate.
Tip: If you pay your credit card off in full each month, you will avoid APR altogether while improving your credit rating faster than you would by carrying a balance month after month.
Rewards and Benefits
Many banks compete for your business and offer a variety of credit cards with rewards programs. These come in many flavors, but fair credit consumers often get the largest benefit out of credit cards offering cash back on purchases, as these rewards can be applied directly to the card balance or put into savings.
Ultimately, the goal of a consumer with fair credit is to build his credit up to a good or excellent rating over one or two years. Doing this rids him of the less than stellar loan offers and terms he is currently eligible for, and opens up new doors for optimal credit card terms, personal loan offers and even extends more favorable terms to larger purchases like homes and cars. It all begins with credit card selection. Don’t take the first offer that comes along. Use consumer advocacy websites like Credit Land for a side-by-side comparison before making a decision. Since credit card offers and terms are subject to change at any time, review these often, instead of relying on an offer for a card you may have received several months ago.