Choosing A Suitable Credit Card.
So many types of credit cards. Which is best for you?A credit card allows you to spend the card issuer's cash and you then pay this back at the end of the month when the statement arrives. You are in effect borrowing from the card issuer and interest will be charged if you do not pay back the whole balance.
The benefits of having a credit card are:
- Convenience. You do not need to go to the ATM to withdraw cash when you are short of cash to buy something.
- Value. You get more from your spending through Gift Redemption and so on.
Choosing the right credit card.
There are so many credit cards in the market each with their own promotions and rewards program. With all the credit card sales personnel claiming the card they offer is the best in town, so which card is really suitable for you?
- Debt Buster
If you have accumulated some credit card balance and you are considering paying down this balance over some time, then choose a credit card which offers 0% balance transfer. This will allow you to transfer balance from another card at 0% interest. Then you can avoid paying interest on this balance while buying yourself time to pay down the balance. This interest free period can be from 3 months to 12 months depending on the promotion on offer. Keep in mind the 0% interest applies only to your balance transfer amount. The standard interest rate will apply to all your new spending on the card. - Balance Retainer
If you usually have some balance or are unable to clear off the balance on your credit card, then the interest rate will be the most important deciding factor for you. Choose a card that charges you the lowest interest rate. This will save you hefty interest in the long run. - Zero Hero
If you pay all your balances every month, then a purchase rebate would be better compared to lower interest rate.If you always pay in full and clear off the balance on your credit cards, then the interest rate is irrelevant to you simply because you will never incur interest charges. Instead, look for cards that offer incentives that match your spending habits. Examples of incentives include CashBack, Gift Redemption and so on.
Other credit card benefits to consider.
Choose a co-brand card with an airliner if you always travel by air.The credit card industry is very competitive. Card issuers will lump in different types of benefits to attract you to use their credit cards.
Some card issuers will partner with member association or popular brands to come up with a co-brand credit card. You get special privileges or discounts when you pay membership fees or purchase the partner's products.
- Annual fees waiver.
Some cards offer free annual fees for the principal card only while others offer free annual fees for the principal AND supplementary cards. Also check if there are any terms and conditions of eligibility for the annual fee waiver. An example is whereby the cardholder must use the card for 6 transactions within a year to qualify for the annual fee waiver. - Free insurance cover.
Almost all credit cards offer some sort of insurance cover such as personal accident, travelling insurance and so on. - Free purchase protection plan.
Almost all credit cards have a purchase protection plan though the protection period can vary from one issuer to the other. This protects your eligible purchases from accidental damage or theft.
Common credit card fees and charges.
- Annual Fee
Thankfully this is becoming a practice of the past. Many issuers now offer cards with free annual fee subject to certain conditions. Some issuers even offer free annual fee for lifetime. Shy away from issuers who insist on imposing the annual fee on your card. - Interest Rate
There is usually an interest free period for you to settle your payment to the card issuer. However, if you do not settle your monthly payment in full during the interest free period, then interest will be charged on your outstanding balance. The interest rate for credit cards is very high and second only to the interest rates charged by loan sharks or illegal money lenders. - Cash Advance
For taking out a cash advance, issuers will impose a processing fee. In addition to that, interest will start to accumulate on the day you made the cash withdrawal. You do not get the luxury of interest free period like your normal spending.