Watch the interest rate

Although it's obvious that the lower the interest rate, the better, it can be surprising how much of a difference it can make.

• If you have a balance of $8,000 at 16% APR, the interest charges are $1,280 a year.
• If you transfer that balance to a card that charges 4.9%, your interest costs will be $392.

That's nearly $900 less. It pays to shop around. Lower APRs reallly save you money.

Consider the grace period

Most credit cards come with a grace period — the time between when you purchase something and when your bill arrives — when no interest accrues. The longer the grace period, the better.

Note: The grace period usually applies only when you've been paying your balances in full each month.

Get the full scoop on special introductory rates

Before you jump on an opportunity for "free" financing, take a closer look:

• How long does the introductory rate last? Some offer a decent interval of six months or longer. Others are only good for two or three months.
• What happens after the introductory period expires? Where does the rate settle? Some rates increase substantially; this means your wonderful intro 3.9% APR can magically turn into 18% APR.
• Is there a transfer fee? Read the fine print to see if the card issuer changes a fee to transfer balances — a charge that effectively increases your true rate.
• What happens if you're late with a payment (or two)? If you're late with a payment or two, not only will you be charged a late fee, you may be hit with a "penalty" rate that can reach 23% APR, 24% APR, or higher. Some credit issuers even penalize you if you're late with any credit account — not just theirs.

Understand penalties

Penalty fees for missed payments can be as high as $35 (or more) each time. Miss three payments a year and you've just thrown away $100.

Even more costly are interest rates that increase as a result of a late payment. You could see an attractively low rate zoom up to over 20% APR.

Remember that repeated late payments not only cost you money — they impact your credit rating, too.

See how you are protected

The Fair Credit Billing Act protects your rights when certain disputes occur related to "billing errors." For example:

• Unauthorized charges (federal law limits your responsibility to $50)
• Charges that list the wrong date or amount
• Charges for good and services that you didn't accept or weren't delivered as agreed
• Failure to post payments and other credits.

Learn more about your rights under the Fair Credit Billing Act.