Taking a credit card-what to consider first

Taking a credit card-what to consider first
Every day, our dependence on a credit card seems to be increasing with more shops, restaurants and institutions asking to be paid by credit card. Whether you are making travel arrangements, buying anything online or making a theatre or restaurant booking, you need a credit card to complete the transaction. However, there are several things you should bear in mind before putting your name down on a new credit card application form. They are:

Restrict the number of cards you apply for: Why should your wallet burst with credit cards? In actual fact, you don’t need more than a couple of credit cards. This being the case, choose cards that suit your need and your lifestyle and see how best you can repay any outstanding on them. If you have too many cards, it means you have too much credit available to spend. This will lead you to take bad financial decisions on the spur of the moment which will put you in long-term debt.

Are your spending habits making you attractive to card companies? If you keep receiving offers from banks and financial institutions to take on their cards, you need to take a re-look at your spending habits. If you have large outstanding, you are a sitting duck for credit card companies since they know that they can earn a lot of interest from you.

Don’t get taken in by ads or promotional rates: Credit card companies usually try to persuade prospective customers with attractive rates of interest to take their cards. But don’t get taken in by these people. There’s always a catch in them which you will experience once you take the card. And beware of the cards that slap a huge interest rate on you just because you made a late payment. It’s always better to have a permanent interest rate on your card rather than a temporary promo offer.

Check out everything about a credit card–not just the interest rate: The interest rate on your credit card is an important basis of evaluation but it’s only one of the many parameters of judging whether a credit card is worth taking or not. If you’ve got revolving credit which you take with you from month to month, only then does the interest rate matter. But if you pay your dues in full each month within the stipulated period, no interest is levied. So, interest would not be a matter of concern for you. And, if at all the interest rate changes within a few months of your taking the card, it’s bound to be a sore point with you. Don’t be fooled by “fixed rate” interest cards because even they can increase their interest rates.

Check out the way the billing system works: It’s good to understand how the billing system works and if there is a grace period within which to pay. Find out the length of the grace period because often banks and lenders use this period to mail your statement to you, giving you less time to pay.

When do you pay late charges and fines? Read the fine print regarding credit card terms with a fine tooth-comb so that you are fully conversant with the payment structure, including late charges and fines. Does any late payment lead to an increase in interest rates? These are questions you must ask and be fully apprised of these matters before being taken in by that glib-tongued credit card representative.

Article by: By Mithi Chinoy

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