Shopping for the best credit card value can be complicated. National bank cards such as Visa, MasterCard, and Discover are offered with a variety of interest rates and a lot of bonuses such as frequent-flier miles, cash rebates, or credit toward the purchase of a new car.

Because the total cost of credit is the interest you pay, plus the fees, consider all of the following:

Interest rate or annual percentage rate (APR) measures the cost of credit expressed as a yearly interest rate. This can vary from 8 to 21 percent, but may actually be much higher, depending upon how the interest is calculated. Under the federal Truth-in-Lending Act, creditors must disclose this figure. Find out if the rate is fixed or variable.

Interest is calculated in many different ways, so that the same balance will cost more on one card than on another, even though they have the same APR. Suppose you receive a statement July 1 with the following information:

Previous balance as of June 1	$300
Payment (on June 15)	$200
Purchase (on June 15)	$100

The annual percentage rate (APR) is 18 percent a year, or 1.5 percent a month. Using various methods, interest can be calculated on:

• The previous balance, which would cost $4.50 (1.5 percent, or .015 times the previous balance of $300). Your $200 payment does not affect the interest you are charged.

• The average daily balance, including newly billed purchases, would cost $3.75 (1.5 percent, or .015 times the average daily balance, which was $300 for the first half of the month and $200 for the last half, for an average balance of $250). This eliminates the grace period on all new purchases.

• The average daily balance method excluding newly billed purchases would cost $3.00 (1.5 percent, or .015 times the average daily balance, which was $300 for the first half of the month and $100 for the last half, for an average of $200).

• The adjusted balance takes into account payments that have been made. You would be charged $1.50 (1.5 percent, or .015 times the adjusted balance of $100), or interest on $300 minus the $200 payment. This method is the most economical.

Some card issuers use a two-cycle average daily balance method. The average daily balance is calculated on the sum of the average daily balance for the previous and the current billing cycles. In this method, interest from the previous statement that may have been paid off immediately is still figured into the total. The two-cycle method is especially costly for those who carry large balances and should be avoided.

Some cards have a variable rate. With a variable rate card, if the prime rate goes up, so does the interest rate. This can be to the consumer's benefit when interest rates are low. A bank can raise the rate with a 15-day notice. Also check to see if the interest rate is part of a special promotion and will increase after six months or a year (teaser rate).

The grace period is the amount of time, usually 20 to 25 days, you are given to pay for new credit card charges and pay no interest, if, and only if, you have no outstanding balance on your card. Even if there is only a $1.00 previous balance on your account, a finance charge will be added immediately to all new purchases. Know when your grace period begins and ends. Seventy percent of credit card users carry a balance from month-to-month, forfeiting the advantage of a grace period. Some cards have no grace period; therefore, you are charged interest immediately, even if you pay your bill in full each month.

Fees: Bank cards charge various fees; common ones are for annual membership, late payments, and exceeding your credit limit. Although some cards have no annual fee, the interest rate may be higher or the grace period is shorter. Other cards offer free or low fee cards, then charge more for late payments or going over your credit limit. When you charge more than your credit limit allows, your credit card issuer may charge you an over-the-limit fee of up to $18. You may not know you are over your limit until you receive the monthly statement.

Minimum payments: Most cards request a minimum payment of 2 to 3 percent each month. The lower the minimum payment, the longer it will take to pay off your balance, and the more finance charges you will pay. Paying only the minimum is guaranteed mathematically to keep you in debt. Would you willingly pay 20, 50, or even 100 percent more for an item just to have it? That is what you are doing when you pay only the minimum balance for an item.

When you pay the minimum on your credit card each month, you are paying the maximum interest fee.

Cash advance charges: Most bank cards charge interest immediately on cash advances and often add a $2.50 fee for the service. There is usually no grace period on cash advances. Because the interest charges start the moment you accept the cash, when you add in the transaction fees the interest on the cash can be more than 32 percent.

Which is the best card for you?

It depends upon your spending and bill paying habits.

• Do you religiously pay the entire amount each month? Then choose the one with no annual fee, a full grace period, no other charges, and the most extras, if you will use them.

• Do you carry a balance each month? Then choose the card with the lowest interest rate.

• Is getting a card at what you consider to be a reasonable rate difficult because of past credit problems? A secured card may be best for you.

Use the Credit Card Comparisons worksheet to decide which card is best for you.

Should you keep the cards you have?

Most people have no idea how much their credit cards cost them and would be amazed how it differs from the stated APR. Use Worksheet 1 to compare your credit cards and determine which are the best ones for you to keep and which you can do without. Some of the information is on your monthly billing statement. The rest should be in the cardholder agreement sent to you when you opened the account. You may wish to call the company's customer service 800 number to verify your findings.

Credit card pitfalls

Using credit to pay for nondurable items. You may still be paying for an item (such as food or gasoline) long after it is gone or no longer usable.

Waiting until the last minute to pay your bill. Send in your payment as soon as your bill arrives if you aren't paying the bill in full. Paying early will reduce your average daily balance, reduce interest compounding, and reduce the total amount of finance charges you will pay.

Paying a higher interest rate than necessary. Call the customer service number listed on your credit card statement. Tell them that you have been a satisfied customer, but you have seen several offers for cards with lower interest rates and no annual fee. Ask them to waive your annual fee and lower your interest rate. If you have a good record of making payments, even if it is only the minimum payment, they will often agree. If you don't ask, you won't know. If you don't get satisfaction from the person you are talking to, ask to speak to the supervisor. You may have to call each year to renegotiate your fees. You can obtain a listing of the low rate and/or no-fee cards by sending $4 to Bankcard Holders of America.

Paying only the minimum payment each month. If you have a card with 18.5 percent interest, it will take you more than 11 years to pay off a debt of $2,000 if you pay only the minimum balance due each month. You will also pay interest charges of $1,934, almost doubling the cost of your purchase. This is assuming that you do not add more purchases to the $2,000 balance.

Paying less than the full balance owed on your credit cards can cost you hundreds of dollars a year in interest. Paying the bill late or not paying even the minimum some months. Paying a major credit card on time over several years is the best credit reference you can have. It is even better than a mortgage or car loan because the credit card loan is unsecured and shows that you can be relied on to pay your debts. Always pay at least the minimum and be sure your payment arrives on time.

Using a card only because of the perks. Carefully weigh the special bonuses offered at certain stores or with certain cards. With these "co-branded" cards (cards that link a credit card with a business trade name) many people charge more on their card just to get a bonus. They may find that they are charging a lot to gain just a little. Be sure you will really use the extra perks, and you are willing to pay extra for them. If you pay the balance off at the end of each month, however, you may receive extra value for your money. If you carry a monthly balance, a card with a lower interest rate may be of more value to you.

Forgetting to keep track of your credit card spending and not knowing your credit card limit. Each time you exceed your limit you can be charged up to an $18 over-the-limit fee.

Juggling too many cards. Most people who have their credit under control find that they are able to function quite well with only two or three major credit cards. This makes keeping track of purchases and spending limits much easier. The more cards you have, the less eager creditors are to give you additional credit.

If you wish to cancel a card, cut it up and send it back with a letter to the issuer. Ask that they notify the credit bureaus that the card is being canceled "at the customer's request." Keep a copy of this letter for your file.

Paying a high interest rate on a credit card for a large purchase when you could have borrowed the same amount from a bank or credit union at a lower rate of interest.

Paying for unnecessary services. Don't pay for credit card insurance. Instead, photocopy all of your credit cards and indicate next to each card on the photocopy the number to call if your card is lost or stolen. Keep a copy in your safe deposit box and one at home. Also, the extra cost for a gold or platinum card is rarely worth the expense.

Having credit limits that are too high or too many credit cards. Some lenders will deny credit if you have too much credit available.

If you are divorced, you can still be legally responsible for debts incurred while you were married. Even though the divorce decree states that your former husband will pay the debt for which you co-signed, if he defaults on paying the debt you are responsible.