Credit cards come with both risks and rewards. If you have a good credit history and pay your bills on time, they can be great! They’ll provide financial help when you need it and additional perks such as travel rewards and price protection. However, if you use up credit faster than you pay it off, you can also dig yourself into a deep financial hole. One that might take years to pay off. Should you decide you want a credit card, you’ll discover a multitude of options, making it difficult to understand which one is the right fit for you. Here’s some advice to help you choose the right one.
Understanding Your Credit Card Expenses
The first step is figuring out where the majority of your monthly expenses come from. This is essential as it helps you to understand what type of rewards program you would benefit from the most. This will allow for accelerated rewards on your major spends! However, there are also certain cards on the market that offer miles/rewards/cashbacks on all kinds of spends. This might be a good choice for you if your expenses are very well rounded.
Evaluating the Fees
Some credit cards have a joining fee, which begs the question: Is this worth it? There is a simple way of evaluating if it’s worth it or not. When credit card companies charge you a joining fee they also give something called a ‘joining bonus’ in the form of frequent flyer miles or reward points. In most cases, these rewards can be easily valued in monetary terms. So the trick is: check for if the said card is offering you the equivalent of the joining fees or less or more. Also, keep an eye out for those renewal charges. Sometimes, you may be surprised to find them to be even double that of joining fees.
Spends to Rewards Ratio
Check the mileage you’ll gain on every hundred dollars spent on the card. This will allow you to know, monetarily speaking, how much percentage savings you’d make on your general spends, airline spends, fuel spends etc. This will give you a fair estimate of exactly how much you’d end up saving annually based on your spending.
Cost to Savings Ratio
While analysing any card one of the most important things to look out for is the direct saving on joining and annual spends against the fees and charges you’ve to pay.
Credit Card Issuing Company
There are various credit card providers such as AMEX, MasterCard, VISA, etc. Depending on where you do a majority of your transactions, you could go for either of these. If you’re a globetrotter and hope to make up for all the lost trips during the pandemic – you’re probably looking for a MasterCard or AMEX.
While choosing the credit card company, make sure to check if they offer complimentary airport lounge visits at cities you frequently travel to. Think of it as a small bonus which adds up if you’re a frequent flyer.
Credit card companies also offer their own exclusively curated dining, travel, entertainment and retail offers (these aren’t usually bank specific).
Over and above the credit card company offers, the bank has its own set of offers catered to each individual. If you’re a student, you should check out the special student offers provided by every bank before making your final decision. Look out for offers that you think you’d definitely use on a regular basis (these can be offers related to movie tickets, groceries, online shopping sites and so on).