You use credit, debit and charge cards to buy products and services. But what makes them different? Do you know the benefits of each one of them?

Let’s start with credit cards. They are used to make purchases overtime and then you pay the amount at a later date. So credit cards are more or less like loans. You may be charged an annual fee by the issuing company. If you don’t pay back all the credit on time, you will owe a finance charge which is added to your outstanding balance.

On the other hand, a change card is awarded and just like the credit card, it’s used to buy products and services and then the amount is paid at a later date. But with change cards, you must pay the balance in full whenever you receive your statement.

Last is the debit card which allows you to access the money you have in your account, either a checking or savings account, and use it to buy goods and services. So the money you use to buy items is not a loan.

What to consider when shopping for a credit card

Credit cards have varying fees, interest rates, finance charges and benefits. You must be ready to shop around for the best prices and deals. Read the fine print to know what you are getting into before signing up for a card. Consider the following:

Know Your Annual Percentage Rate (APR)

The APR must be disclosed by the issuing company before you sign up for the card. This rate may also change so you need to find out the limits and how often this is likely to happen. Know how the rate is determined by the issuer.

Understand the Grace Period

Know how much time you have to pay the bill in full before it starts attracting interest. The credit company should give you the statement date and how many more days you have to pay the bill in full before it triggers a financial charge. Most companies will only give a grace period for new purchases and not on cash advances or balance transfers. You may also want to consider a business cash advance as an alternative to drawing a loan from your credit card.

Know the Annual Fees, Transaction Fees and Other Charges

Credit card issuers usually charge an annual fee or participation fee. You need to find out how much this is and whether you will be paying it every month or at the end of the year. Issuers may charge additional fees if you exceed a credit limit or get a cash advance. You need to find out what these fees are before signing up.

Customer Service

Customer service is important since you rely on the credit card company to resolve urgent financial matters. They should have a toll free line which you can contact.

Other Charges

Credit card companies can have unauthorized charges which you need to be aware of. You can be charged if the card is lost before it was used. It’s a good idea to find out all the information about the card from them.