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How to pick the best deal on a credit card

A recent law makes it easier to sort the credit-card bargains from the ones that should be tossed in the bin, says Jean Chatzky.

Q: I receive at least one solicitation a week from credit card companies offering me a new card. How do I know which one to take?

A: The key to making a smart choice is to check out something called the Schumer Box, which is a disclosure chart that by law must now be included in every credit card solicitation. (The box is named after U.S. Senator Charles Schumer of New York, who pushed for it.) Line up your offers side by side and compare the following information that each box includes:

  • The actual APR (after the introductory teaser period; the lower the better)
  • The formula for computing a variable APR
  • The length of the grace period (the longer the better; look for 25 days or more)
  • The annual fee (most cards these days, except for mileage and platinum cards, don't have one)
  • The minimum finance charge
  • The transaction fees (for cash advances, balance transfers, etc.)
  • The method used for computing your balance ("adjusted balance" is best for consumers but is rare, "average daily balance," a good second choice for consumers, is the most common; "two-cycle balance" is not good for consumers and should be avoided)
  • The fees charged for paying late and going over your credit limit.

Jean Chatzky’s Bottom Line
This week: How to negotiate a great car deal
Whether you buy or lease a car, you'll need to be prepared to negotiate. It's not always easy. Here's what you need to do:

Get a handle on costs. The very first thing you have to do is get a grip on the dealer's cost (also called "dealer invoice price"). You can find these on the Internet. Try Edmunds.com (www.edmunds.com). Once you have that number, decide how much above it you're willing to pay. Several hundred is a good starting point on the most popular models. Again, Edmunds.com can help — it provides estimates of the demand for various models. The less the demand, the less you are likely to have to pay over the invoice price. Indeed, you may pay under invoice if the dealer is anxious to move the car off the lot; conversely, you may have to pay $1,000 to $2,000 over invoice for hard-to-get cars (particularly some luxury models).

Shop around for loans. The best thing you can do before you walk into a dealership is to have a loan approval in the bag. Even if you decide to go with manufacturer-arranged financing because it happens to be a great deal, you don't have to, which means you can just name your price and see if the dealership will meet it. Get all offers you like in writing and don't jump at the first one that seems to be in your range. Make sure you shop at least a couple of other dealers to see if you can beat it.

Consider going used. There's no better deal on the planet than a good used car, with a solid warranty, that you drive into the ground. By the time a car is only two years old, it's depreciated by about 60 percent — and yet has only about one-third of its lifetime miles. Used cars started outselling new cars in the late 1980s and continued to do so through the 1990s, when fierce competition among manufacturers drove new car prices lower, thus making it easier to afford a new car. This makes used cars even more of a bargain — the lower price of new cars had a knock-on effect on used car prices.

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," will be released in September. Copyright ©2004. For more information, go to her Web site, .