Credit cards are not all the same, and picking the right one for your needs can be rewarding – literally.
Many banks provide initial offers on credit cards such as zero-interest balance transfers and ongoing perks. Based on your needs, you can pick the card or cards that help you get the best out of your spending. For example, if most of your spending is on food and groceries, having a card that gives you cash back on your grocery store shopping can be great. If you’re a traveler, airline and accommodation discounts can be what you should look for.
The point is: if you have a steady income and banks are trying to attract you as a customer, don’t rush to take the first offer or the highest limit you can get on a card. Instead, look for a card that helps you save. Here are some main areas that you can look at for your benefit.
Fees and interest
Credit card costs involve the annual fees and the annual percentage rate (APR) charged if you don’t pay your balance in full. Look at both closely, and make sure that you check if they would change after an introductory period.
Many banks offer cards with no annual fees. So if you’re getting a card that carries an annual fee, make sure that you’re getting something special in return – like cash back, discounts, club membership, insurance coverage, etc. The value of these additional perks – if you’d use them – should exceed the annual fee you’re paying.
Rewards, cash back and more
Some banks offer regular perks on their cards and occasional offers. For example, you might always get 1 percent cash back, but your offers on restaurants, hotels, etc. change periodically. So don’t get a card because it offers this month or this quarter a discount on a hotel that you like. Instead, look at the overall quality of offers and how it translates in terms of saving. Be realistic whether you’d actually use these offers or not.
Remember that not all cards offer all perks. So ask in particular about what you need most: balance transfer, low interest, cash back or discounts. You might get a few other perks, as well, but match your card with your priorities.
Don’t hit the limits
Banks often offer generous limits on credit cards, so don’t use these as indicative of how much you should spend. Your spending on a credit card should be guided by what you will be able to pay off in full rather than what’s available on your credit card.
Although it could be reassuring for someone without much saving to have thousands of dirhams available at their fingertips if needed, spending this month irresponsibly can be the beginning of a slippery slope of debt.
So while you should shop for a card with a reasonable amount of money available, more isn’t just better. Find what you need and avoid the temptation of living beyond your means. In fact, some banks would request your permission before they raise your limit. If you don’t need the extra availability, you can always reject the increase.
Safety is a perk
Banks that provide better fraud monitoring and online security save you money. If you’re sure that if your bank will be on your side if your card is compromised, you should have more peace of mind. Take a look at what the bank offers in terms of fraud monitoring and find reviews from actual customers. Banks typically don’t charge you anything extra to provide this sort of monitoring, and not all of them do.
So make a point to pick a bank that will support you when you travel or shop online. Although that might not appear to be the type of saving you will always get – like cash back, it does matter when you need it most.
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.
Choose your card
Know what you need
Don’t chase high limits
Check beyond introductory offers
Look at perks, fees and safety
— R.O.