A credit card is a very handy tool. You can make purchases without the hassle of bringing too much cash with you. However, it can also be a very dangerous tool. If you don’t know how to handle your finances, you might end up in tremendous debt later on. So, before you apply for one or another one for that matter, make sure to check out first if having a credit card is good or bad for you.
If you think you can handle a credit card, the next thing to do is to choose which is the right one for you. There are tons of different credit cards available out there. Before you apply for one, shop around first to see which one is the most appropriate for your needs. Choose the one that best fits your lifestyle and spending habits.
Here are some things that you should consider in choosing the best credit card:
Ask yourself what do you need the credit card for? Do you want it for convenience? DO you need it to pay your bills? Do you want to purchase high ticket items and use the credit card to spread the cost of purchase? Do you want to use it to make an online purchase? Knowing your purpose will help you narrow in your choices for the best credit card that is suited for you.
2. Interest Rate
This is the price that you pay for borrowing money if you don’t pay your balance in full on or before the due date. This is how credit card companies earn. All credit cards have an interest free period. If you pay for your purchases in full during the interest free period, you can avoid paying the interest rate.
For the record, most Philippine credit cards offer an average annual rate of 42-45% interest. Obviously, you don’t want to end up with piles of debt just paying for the credit card interests alone. So, make sure to spend only what you can pay on the next billing cycle. Just the same, look for a card that offers the lowest interest rate.
3. Annual Fee
The annual fee is the amount charged by credit card companies on a yearly basis just for the use of the credit card. It is kind of like a membership fee. Depending on the credit card, annual fees vary. Not all credit cards have annual fees though. Some card companies even offer a waived annual fee for life. Premium cards on the other hand, have higher annual fees. This is fine as long as the benefits you get from using that card exceeds the cost of the card.
Rewards cards give credit card users incentives for the use the card. Generally, points accumulate each time the credit card is used. The best thing to do when making a choice is to ask yourself what kind of rewards or incentives do you want? The answer lies in your lifestyle.
Below are samples of rewards cards:
- Airline Miles Credit Card – This card allows credit card users to earn airline miles for every purchase. Usually tied up with a specific airline company, miles are redeemed for free travel or upgrades.
- Cash Back Credit Cards – This card gives a percentage refund of your purchases. The more you used your card, the more cash refunds you will get. If used properly, the card owner will be able to accumulate a significant amount of money over time.
- Gas Credit Cards – Tied up with major gasoline stations, this is generally a gas rebate card. It is specially useful if you are loyal to a certain gas company.
- Hotel Credit Cards – This type of credit card gives gives rewards specific for travel specifically hotel accommodations and sometimes even airfares and rent-a-cars. Some cards are even co-branded with major chains of hotels giving additional points each time you use your credit card in their properties. Points can also be use to claim free rooms or upgrades. If you love travelling, then this as well as the airline miles credit card are the perfect cards for you.
- Loyalty Points or Rewards Cards – This type of card allows you to earn points each time you make a purchase. You can then exchange the points you have accumulated for a variety of items such as gift certificates, electronics, hotel stays, and many more options available for redemption.
- Retail Rewards Credit Cards – Usually co-branded with major retail stores, apply for this card if you love to shop. Credit card users are normally rewarded with double points sometimes triple when you shop in that specific retailer. However, rewards points can only be redeemed in that retailer.
Choose what’s best for you and remember to use it wisely!