A credit card isn’t exactly something that qualifies as a major life decision, but it’s a fairly big decision. After all, while having a credit card means that you can start building your credit score for when you want to take out a home loan, car loan, or personal loan.
There’s also the exhilarating possibility of things you could do with a credit card in your hands. The card you end up with could be a gateway to debt if you aren’t careful, or you could end up with more rewards than you thought possible.
So before you think about filling out an application, here are some things you should ask yourself before getting a credit card.
Why do I want one?
Sites like Bankrate and Learnvest, as well as Bruce McClary, media director for ClearPoint Credit Counseling Solutions consider this the “very first question” that consumers need to ask themselves.
If it’s your first time trying to get a credit card, you’ll want to gauge why you want a credit card, beyond not having to carry cash around. This question also informs the kind of credit card you should be applying for. If you’ve always managed to pay bills on time and in full, that also factors into how well you’ll be able to maintain your credit card use.
What’s the Monthly Interest Rate?
The monthly interest rate or effective interest tells you how much interest you’ll be charged each time you are unable to pay the full amount on your monthly statement.
In the Philippines, the average monthly interest rate is 3%, while some cards may have lower or higher interest rates depending on the rewards or miles programs attached to the card. Some cards provide facilities for 0% interest on installment purchases, which is enticing but presses you to be able to pay the monthly amount.
Are the rewards worth it?
Rewards programs attached to credit cards entice cardholders to spend towards reaching certain points that can be traded for discounts, rebates on purchases, or freebies. It’s not limited to shopping; some cards are geared specifically towards air miles or fuel.
An example of this is being promised bonus miles for reaching a spend amount. Other cards will offer an “accelerated” rewards program, allowing cardholders to get points or miles faster. If you aren’t one to travel too much, a credit card with an accelerated rewards program may not work out in your favor.
It’s more realistic to get a cash back card, which allows you to get back an average of 2% on spends for groceries or fuel. Rewards programs that involve things you’re likely to spend money on are more practical.
How do I know which card is the right one for me?
Knowing which credit card is right for you will depend on what you want to use it for. Is it for emergencies? Are you going to use it for online purchases?
Whatever your plans are, it’s important to do research on the cards that are available to you. While doing the legwork and getting brochures for each bank’s available options could work, there are online comparison platforms that could assist you easily.
It’s ideal to compare interest rates, rewards programs attached, interest rates, and annual fees to ensure that you get the best deal.
Getting your first credit card does have a little bit of excitement attached to it but bear in mind that having a credit card can make or break your credit health. Once you’ve gotten one, take the appropriate precautions to not overuse it.