Pick and choose

Everyone has one, as they should, but not everyone exercises prudence, nor do most people milk the credit card for all its worth. And that, they must. Fees can stack up very quickly for the cardholder who is unaware. Picking the right card can be an astute form of financial planning, and using it wisely can help offset the cost of credit. With so many on offer, it is best to narrow the selection with the right criteria.

Here are ten questions one should ask before applying for a credit card:

1. What sort of benefits am I likely to utilise?

Credit cards these days come with a world of perks. If they are used prudently, then the fees and interest rates associated with the card can be compensated. For example, if you are a frequent flyer, plenty of cards nowadays offer air miles as well as lounge access with purchases. Car owners are offered valet parking privileges and frequent shoppers receive discounts. Use the fringe benefits to the maximum, and the card will do more good than damage.

2. Will I use the card for emergencies only?

Be realistic about this one. If you truly intend to only use your card when stranded in the desert for a passing ice-cream van that under no circumstances accepts cash, then there are particular considerations. Choose a card that is low on annual or maintenance fees. High interest rates might also then be not much of a concern — cards with high interest rates tend to offer other rewards to compensate.

3. Do I intend to use this card abroad?

Card providers are big on international usage — both on charges as well as perks. Some offer a significant amount of cashback for swiping abroad. Others' international fees will kill. It would also be a good idea to check up on standard exchange rates for using your card in another currency. Additionally, some cards are unlikely to work in certain countries as they are not well recognised. For the globetrotters among you, it might be best to pick a multinational bank as a card provider.

4. How big a credit limit do I require?

Another way to phrase this question might be, am I likely to surpass my credit limit? Then again, another way would be, am I likely to abuse whatever limit I am endowed? It's a game of psychology. If you feel you are spendthrift and will take any quarter given, keep your limit within reasonable range — say half your monthly salary. However, if you are an uber-squanderer who cannot be restrained by mere credit limits, then you will likely get bankrupted by excess charges. Each to their own.

5. Am I using this credit card to fund one particular objective or as a general payment method?

For example, if you are a budding entrepreneur and have decided to fund a new business with a credit card (not uncommon), or are financing the purchase of a large asset with one, reconsider whether this is the right method of payment. Personal loans are cheaper, but likely only if your repayment period is medium to long term. If you are the next Mark Zuckerberg and your business takes off within a month, then the early settlement fees, etc. on a personal loan might add up, in which case a credit card would make sense.

6. Will I require supplementary cards?

This is a big question for you family men (or women) out there. Cards for the kids and the spouse can turn out to be utter disasters. Hence it is best to find a card provider who extends to you some real controls over your supplementary cards. Most providers are happy to give you up to five free supplementary cards, but this varies in some cases. Nevertheless you should at least be able to dictate individual limits on each.

7. How useful is internet banking to me?

Internet banking isn't really a requisite for carrying a credit card. So if you are a cyber-phobe, you needn't worry. Those hackers can't get to you if you don't play on their turf.

However, if you cannot do without handling your business online, then make sure your credit card provider gives you the option. Online banking may be commonplace in other countries, but it is yet to become the norm in the UAE.

8. Fees and penalties — let me count the ways

There are many types of charges associated with credit cards. Rummaging through them requires a magnifying glass to the fine print. Sometimes there are optional costs that you end up paying involuntarily unless you specify that they be revoked (insurance payments that might in themselves be useful, depending on your risk appetite).

Other times you'll be charged for losing your card or withdrawing cash against it. There are many ways to get squeezed for that extra buck, so just make sure you read the terms and conditions before you sign on.

9. Does two plus two equal five?

Credit cards go hand in hand with an account from the same bank, in which case settlements, transfers, etc. usually take place at light speed — which is also why most people tend to get a credit card from the bank at which they already have an account. There are added benefits of consolidating your financial activities. The more business you give a bank the more attention they'll pay to you. Pretty soon you can have a well-priced mortgage, a life insurance policy, free stationery… but wait, are you just getting a discount on stuff you don't need?

10. What is the maximum I'm willing to pay in interest?

So we arrive at the bottom line. Essentially you are purchasing credit and if you are the black-and-white sort, competitive pricing is king.Again, this could depend on how much you use your card, the other charges, the perks, etc., but it is the most straightforward measure of a credit card. Rates tend to be fairly homogenous, but one must still watch out for clever marketing disguises.Good rates can be variable, some might only last a couple months, some might depend on a minimum purchase amount, and so on.Get your abacus out.