As credit card usage grows, and you get more and more calls from banks trying to sell you their credit cards you will need some parameters to help you evaluate the best credit card for you.
Today, we’re going to take a look at 5 factors that you should keep in mind while deciding which credit card you opt for. These factors are fairly easy to evaluate and it shouldn’t take you more than 10 minutes to figure it all out in your head.
All credit cards have interest on outstanding balance, but there are some on which you have to pay an annual fee. You should try to avoid such credit cards because there are plenty of banks that provide you a credit card without an annual fee.
There are some cards on which there is no annual fee, but a renewal fee. This is nothing more than the fee waived off for the first year. Basically they don’t charge you for the first year, and then have a fee to renew your membership after that. I recommend staying away from these cards as well.
The only time you should be willing to pay for your credit card is when you see real value in the service they offer. They could be offering concierge services, or there could be a good cash back or rewards program that you think you can take advantage of. If you don’t see any tangible benefit then don’t pay for the card as you can find plenty of free credit cards in the market.
2) Easy to manage:
Your credit card should be really easy to manage and pay off. The easiest way is to link your credit card to your bank account and pay the bill online. It should be your goal to find the card that’s very easy to pay off because if you end up missing a payment you will end up paying very high interest needlessly. As far as possible – go for the credit card that’s easy to pay off. We often underestimate inconvenience and end up paying a price for it. For example – you may not think much of driving to a nearby ATM to drop off a cheque, but ask yourself how many times you’ve forgotten to make a payment, and how many times have you just delayed a haircut because you were feeling lazy? Life is complicated as it is and you don’t want to make it any harder on yourself by adding another task of driving to a bank or ATM to drop of the credit card payment. As far as possible look for a credit card that can be paid online, and if possible link it to the bank you have an account with anyway. That way your payments will be instant.
3) Where do you spend the most?
Some people have a lot of air travel, others need to fill up petrol quite often, and then there are others who shop at a particular mall very often.
Find out where you spend most of your money, and then see if there is a credit card that will give you rewards on where you spend the most money. Most petrol pumps have co-branded credit cards that give you some money off, and there are air travel credit cards as well. Find out the credit card that gives most bang for your buck.
I’m sure you know friends who got a toaster for all the reward points they gathered over years! You don’t want to be that friend, so be smart and do a little planning before you apply for a credit card. A little thought on the rewards program can go a long way in terms of reaping benefits later.
4) Rewards that don’t expire:
Some credit cards give reward points but they expire after a certain period. Make sure you are familiar with how the reward points work; ideally they shouldn’t expire at all, but if they do – then make sure you’re familiar with how long they last and how you can take the most advantage of it.
5) Reward points used to pay off outstanding balance:
There are some credit cards that allow you to use the reward points to pay off your outstanding balance, and that’s just great because sometimes it’s a challenge to use reward points. However, such cards may have an annual fee, so be careful – you don’t want to pay so much in annual fee that the rewards become meaningless.
These are five factors that you must think about while selecting a credit card, as a credit card can be a great tool if used wisely, but can be the most lethal of weapons if you don’t give enough thought to which one you use, and how you use it.
Disclaimer: This post represents the opinion of its author only, and does not in any way reflect the opinions of the author’s employer, The Financial Literates or the other authors who write content for this Website.