September 22, 2017

5 Things to Check Before Choosing a Credit Card

Before anything else, the first question to ask yourself is, “Should I get a credit card?” Getting a credit card comes with certain responsibilities, so it pays to think long and hard why you should get one. One of the benefits of having a credit card is it can greatly help you build your credit record, which is then important for when you need to get a loan in the future. It is also an important tool in case of an emergency when cash is not readily available. However there are some disadvantages, the main one being that you can get into debt very quickly because you are spending money that isn’t yours. You will have to pay this money back, usually at a high rate of interest, so a credit card could end up costing you a lot of money.

Should you decide that you need a credit card, here comes the second question: How can I pick the best credit card for me? Here are five things to take into account:

  1. Determine the Annual Percentage Rate (APR)

As much as possible, it is essential to pay your balance in full. Otherwise, you will have to deal with the Annual Percentage Rate. This is the interest rate that you need to pay on top of your actual balance. There are several banks that offer lower or zero interest rates for the first few months or year. Check what the APR is when looking for card options. In general, the lower the APR, the better. However, some banks provide interest rates according to your credit score, so it is best to check with the bank if they offer fixed interest rates or not.

  1. Be familiar with the fees

One of these is the annual fee. Some banks charge an annual fee, others don’t. But before you lean towards those that do not require it, make sure to check the fine print. While it would be great not to pay a fee for every year that you’re using the credit card, the rewards and perks of cards with an annual fee generally more than make up for it.

Another fee to consider is the foreign transaction fee that you pay for when you use your card overseas. Take note that not all banks charge this fee for every dollar you spent when in a different country.

You also need to look at the balance transfer fee or the amount you pay when you move your balance from one credit card to another. At first glance, this is a benefit since you can transfer balances to the card that offers a lower interest rate, but the balance transfer fee may be higher than if you opt not to transfer.

  1. Know the credit limit that you can handle

If it’s your first time to get a credit card, it may be wise to have a lower credit limit. It can help you get used to spending with a credit card, plus it can teach you a thing or two about managing debt. Once you’ve learned how to manage your finances and spending habits, you may increase your credit limit. Having a higher credit limit has its benefits, too. For instance, it can eventually help you in establishing a good credit score, provided that you keep your monthly balance lower compared to your actual credit limit. Of course, do not get a card with a credit limit that allows you to have more debt than what you can actually pay off.

  1. Check the rewards program being offered

This is probably one of the major deciding factors when choosing a credit card. Every time you use your card, you will earn points which can then be used in exchange for different types of rewards. One way to determine the best credit card for you is to know the rewards that suit your lifestyle. Do you love to travel? You can pick the credit card that offers travel vouchers and discounts on airfare and hotels. If you’re into shopping, there are rewards programs that feature discounted prices on online retail stores, supermarkets, and other shops.

  1. Know if you can manage your account online

In this day and age when most transactions can be done through laptops and smartphones, it is best to pick a credit card from a bank that offers a range of online capabilities that will make account management more convenient. You can do automated transfers and online payments. You can also easily view your account, helping you keep track of your balance.

Final Thoughts

Choosing the best credit card for you can be daunting at first. There are several factors to consider and sometimes, this takes some time. Assessing your spending power, lifestyle, and preferences can greatly make the selection process easier. These five things to check when choosing a credit card are likewise helpful so you can make the right decision.

Having problems in choosing the right credit card for you? Share your comments below.

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What to consider when choosing a credit card in Australia

When well managed, credit cards, can be a convenient way of accessing your money. However, without considering how you will use the card and its conditions, you can end up paying a whole lot of money for nothing. Here’s a list of things to consider to compare credit cards in Australia and choose the most preferable one for you.

Card brand

Credit cards are accepted almost universally in Australia, but, not all credit cards cost the same to use. The credit card companies themselves charge businesses a fee to process credit card payments, regardless of which bank issued the card.

Visa and MasterCard are usually free to use; other major brands can charge a 1-2% fee on standard transactions. Although these cards offer greater rewards benefits, it is unlikely to offset paying 1% extra for everything.

Credit limit

Standard or basic credit cards have a lower credit limits than more ‘premium’ cards. However, they will usually also come with much lower fees. If you are a big spender, then you might need a premium card that offers a higher limit.

Annual Fee

Annual fees range from zero to hundreds of dollars depending on how ‘premium’ the card is. Generally, the more benefits, the higher the annual fee. The benefits usually come in a combination of reward points, travel insurance, concierge services, airport lounge passes, or dining discounts.

Interest rate

There is no ‘right’ interest rate for everyone, it really depends on how you will use the card. A high interest rate card with lots of benefits might suit someone who pays off their card every month, and therefore never pays interest. A low interest rate card could be useful if you intend to pay the debt back slowly.

The interest rate is relevant if you do not intend to pay your card off in full each month. Credit cards have a period, usually 55 day, in which purchase are interest free. However, if after this period the card is not paid off, interest is charge from the purchase date. It’s best to check the individual cards terms and conditions.

Other factors

  • If you intend to use the card overseas or purchase from overseas online, consider the international transaction and foreign currency charges.
  • Most banks offer interest free periods on balance transfers at some point during the year. If you already have a credit card debt then a balance transfer deal could be a good option.
  • Some banks offer free credit cards when packaged with a home loan or other products.
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