Thursday, 17 December 2015

Why should you compare credit cards before applying?


Shopping around for a credit card is important, because the deal you manage to get today will pay off in the coming years. Before you sign on the dotted line, make sure you know what you are signing up for, and make the credit card then work for you. Let’s take a look why comparing cards before applying for one is so crucial.








Annual Percentage Rate
This one is a biggie – the Annual Percentage Rate, or APR, is the rate of interest you have to pay on those occasions you do not pay your bill in full, or roll over part of the amount due. A majority of cards tempt users with introductory offers – either a lower APR, wherein for the first few months (or up to a year) you would have to pay a lower rate. In some cases, the interest rate can also be 0%. Hence, if you’re looking for a balance transfer or a way to reduce credit card debt, this option would work great. However, in the long run, you want to ensure that the card you ultimately sign up for does not have a very high APR, in comparison to others.

Rewards
Credit cards are favoured by a majority of the population worldwide owing to the host of attractive benefits and features they provide the cardholder with. When you make a purchase, reward points are automatically notched up on your card account, which can then be redeemed towards retail purchases, air travel, or even a gift card that allows you the freedom to buy what you want, when you want.

When you’re shopping for a card, make sure that you narrow down on those cards that give you the maximum rewards for regular spends such as grocery and fuel. If your card has handsome rewards only on premium or luxury purchases, you want to think a moment – after all, spending more to get rewards does defeat the purpose!

Credit limit
This is an important aspect of any credit card – the limit assigned to the cardholder by the issuer. When you apply for credit card, you need to ensure that the limit you are given on approval isn’t too high, or too low. The reason is, a very high limit may tempt you to spend beyond your means (remember, you ultimately have to pay off those card bills!), and an agonisingly low limit may not meet your requirements. For example, if you have larger monthly expenses they may not be met with a low limit.

The concept of credit utilisation ratio is one we must introduce here. When a limit is assigned to your card, do stay well within the same – generally, 30% of the limit is considered to be prudent usage. Regularly using a larger portion of the limit can indicate issues with solvency, as the cardholder obviously requires credit to make ends meet. A lower ratio conversely indicates that the individual is able to handle their finances judiciously.

Fees and charges
Remember, it’s not only about what you need to pay when you first get the card – over the lifetime of usage, you will need to factor in all applicable charges and fees, be it annual fees or on that unavoidable instance, maybe even late payment charges. Further, some cards tend to have higher charges on overseas transactions, so if you do travel abroad frequently, make sure that your card can support the same.

Customer service
Last – but definitely not the least – customer service is one factor that you cannot afford to overlook when you apply for credit card. Your relationship with the card issuer or bank does not end merely on receipt of the card, but continues over the lifetime of card usage. Hence, whether you need to get in touch with them for a quick question you may have, or issues with the card (which can sometimes occur), you need to be able to speak with someone who can address your concern with efficiency and ease. 
 
These are some of the more important reasons why you should compare credit cards before applying. Choose wisely and choose well, and make your card usage a happy and rewarding experience.

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