Credit card accounts
Selecting the Right Credit Card.There was a time when Credit cards were considered status symbols it was considered Fashionable during those days to display a collection of these fancy things in front of others. The number of sycophants one had was directly proportional to the number of credit cards in the wallet!
Things have come a long way since then and credit cards are here to stay. They have become so common now that its considered a taboo not to have one. Most of us opt for them because everyone else has Why not me then Valid enough but quite a few people just sign up for credit cards because they ve seen someone having them or because some agent looking for his bakras for the day brainwashed our unsuspecting man.
Of late some companies have very smartly begun targeting students of top B-Schools, knowing fully well that these guys are going to earn
mega bucks and spend like hell. By giving them a free card even while theyre still studying, it baits them for life.
Signing up for a credit card without knowing how and what to use it for can be dangerous and get one into a perpetual debt trap.
Here are a few important things to check oneself for before opting for a credit card.
1. Income stream - Do you have a regular job with a regular income If you dont have a regular job or if you have one that does not have a regular income, it is better not to opt for a card. Beware! A credit card is like a live ticking bomb in your wallet...once you start spending on it, theres no end to it. Ensure that you have an income in order to pay for your purchases made on credit. Failure to pay for credit will lead to heavy Karzdaari in the future.
2. Control over oneself Ive seen people shopping at big malls and they buy as if they intend to empty the whole place and invariably they end up paying with a card.
3. Intention Why do you want to have a credit card Are you a business traveller who has to spend lot of money for tickets/hotel reservations or someone who shops occasionally Are you getting the card free of cost with promises of waiver of the joining and/or annual fees for the first year Be clear why exactly you want to opt for the card.
Once you are clear on the above three points, heres what to consider while selecting a card that will suit your profile and requirements:
1. Acceptability : Opt for a card that is accepted at a larger number of establishments all over the world. Imagine getting struck with a bunch of non-descript cards and not a penny on you!
2. Annual Percentage Rate (APR ) : - The APR measures the cost of credit on an annual basis. It includes the interest rate, service charges, and various other costs. A cardinal rule is lower the APR, lower the cost of credit. Using the APR as a benchmark is the easiest way to compare costs among different credit cards.
3. Joining Charges/Annual Fees : Most credit card companies pretend to waive the joining charges by convincing a person that he/she has been specially chosen for an offer or that some promotional drive is on and they are waiving the joining charges for whoever enrolls during that period. Dont let that flatter you...these companies are not fools...they will recover it somewhere or the other. Most companies also waive the annual fees for the first year to get people hooked on to their cards. Half their job is done if they can sell their card...because the user invariably misses out on canceling the card at the end of the first year with the result that a fresh one is sent with the Annual charges being collected upfront.
4. Grace time to pay : - A grace period allows you to avoid finance charges by paying your bill in full before the due date shown on your statement. Most companies generally give a few days extra (normally between 21-30 days) from the date of purchase to make good the payment. Opt for one that gives a higher grace period.
5. Interest rate : If you are the kind of person who spends a lot but intends to pay off in small installments, look out for the card with the lowest interest rates. As a tradeoff, the card companies may charge a higher annual fee.
6. Other Benefits : It has now become almost commonplace for credit card companies to announce a slew of other benefits to their customers. Lets see...one gets free insurance cover for both death as well as for disablement by accident, then there is insurance for lost baggage while travelling by air, limited indemnity in case of loss of card but to be informed immediately, insurance for theft of certain types of household goods/appliances bought using the card, etc. Ah, heres one more that most might not be aware of, theres also something like an insurance claim in case the flight in which one is travelling gets hijacked! Do check that out too...never know what might happen, what with all those planes flying wildly about these days. Some companies also offer add-on cards to spouse/family members either free of cost or at a nominal cost...check out if you need that feature too.
7. Credit Limits and Cash Withdrawals : Check out what your credit limit is likely to be (the higher your income, the higher the credit limit) and also the limits for withdrawal of cash and interest rates applicable for the same. Some cards charge something called Processing Fees which is nothing but another source of income for them at your expense. Id suggest not using this feature as much as possible unless one is really broke or in desperate need of funds, in which case, it can be a Godsend.
8. Balance Transfers : Some cards (like AMEX) allow the user the liberty of transferring his outstanding balances from his other credit cards to this one. If the interest rates charged by a card are less as compared to the others, it makes eminent sense to transfer the balances and save some hard earned money for yourself.
There are a host of other details but the above ones are by and large the critical ones. Remember that a credit card is an instrument to be used only when absolutely necessary, if used recklessly, it can strangle you by the neck and leave you penniless.
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