Credit cards are an easy way to immediate gratification to spend and buy with money you don’t have and it often forces many to run into debt and even bankruptcy. It is therefore crucial to weigh the pros and cons before filling out any old application for a credit card – which I receive almost daily in my mail LOL (:–).
There are several factors which should be considered before applying – I’ve tried to outline them below but please keep in mind this is a short list to serve as a guideline only:
- Every time when you apply for credit of any kind or a credit card, a mark is made against your credit rating. The available credit on the card you have is applied to your overall debt ratio – even if you don’t have a single dollar balance on it !! Can you believe that !
- Some credit cards give points when you purchase nearly anything. These points can be used for further shopping and other great bonuses, Air Miles for example. Hence, if you’re a frequent flyer you should look for credit cards that offer rewards that will be a benefit to you. The points earned by you come in handy for future hotels and flights.
- Look for credit cards, which offer standard APR and low introductory rates for balance transfers.
- Some credit cards award you cash back for purchasing at certain stores. Therefore, apply for a card which awards cash back at stores where you actually shop or it won’t be worth it.
- Accountability: In my own situation I’ve made myself accountable to my wife for large purchases so as to not let my emotions get the best of me. There will always be another super sale!
- Checks and Balances: Come up with your own plan for dealing with debt before you apply. This will be something you can look back on if you run up a debt on the card. Tie this in with #5 above so that if you do begin to run a debt balance you’ll be able to pay it off soon. The majority of credit card holders run a large balance and for many this would be dealt with if they had an accountability partner to work through the debt with.
- One benefit of credit cards is that if you continually make your payments it looks really good to on your credit statement and may actually help your overall score.
If you’re still set on getting a card here are some guidelines to help you choose a reliable company.
- Interest rates: Your most important factor to consider while managing credit card debt. Choose a low interest rate credit card and only after reading all terms and conditions.
Of course you’ll be way happier to just pay it off each month but like most you might run a balance here or there and high rate cards can bite you if you do.
- Annual fees: Most credit cards now do not require any annual fee, this being driven by competition. Try for a credit card company which does not charge any annual fees. Although I’ve found in personal experience that if you’re wanting the bonuses and points plans there will be a fee in many cases.
- Withdrawals or Cash advances: Though handy in certain situations this can sometimes be way too tempting and ring up your debt faster than you’d like.
- Loyalty Schemes or Reward points: Cash back rewards and Air miles are used to attract you the customers. Many people chose a specific credit card for these kinds of benefits. Be cautious while buying credit card with these benefits.
- Insurance: Choose a credit card with insurance, which will cover you from any theft or burglary. If you are a frequent traveler then choose a card which provides you free travel insurance.
- Gold and Platinum cards: These might look great in your purse or wallet but often they are not the most competitive cards in the market. Annual charges are also applied to these types of cards. So don’t decide on designs and colors of cards. Just see their benefits and compare from there.
- Conduct an online comparison: There are many types of online survey’s and comparison reports that have been conducted. Try doing a google.com search on the term “credit card reviews”.
Of course the above is not an exhaustive list but should put you in the right direction if this is your first time applying for a credit card.
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