Credit cards have become a part of our everyday lives that it seems impossible to live without them. More and more banks and financial institutions are coming up with promotions that are irresistible– lower APR, zero annual fee, not to mention perks and rewards that suit your lifestyle.
You probably already have one or two cards in your possession. But did you know what you were really getting into when you signed up for a credit card? Here are some questions you should have already considered before applying for a card – or should think about for your next one.
Why Am I Getting A Credit Card?
When signing up for a credit card, make sure there is a good reason for it, especially if it is your fourth or fifth card. Some of the things to look at when choosing a credit card are the promos, perks, and rewards—are they different from the cards you already have?
If you are a frequent flyer, then the best credit card would be the one that is tied up to an airline and earns points when you spend using your card. But what is more important is that the card you choose should be suitable for your spending needs.
Applying for a new credit card can and will affect your credit score, which is why deciding to sign up for a new one is something you need to think about first.
How Much Will It Cost Me?
While having a credit card has a lot of advantages, it doesn’t come free. Even when the offer says the annual fee is waived for the first year or so, there are other fees associated with using one. Below are some of these fees.
Interest – when you use a credit card, the bank is lending you money. For that, you pay interest. Interest charges vary per card; banks usually charge between 26 to 28 percent annually.
Transaction Fee – if you use your card for overseas transactions, like when you sign up for a subscription to a foreign magazine, buy items online, or pay for a restaurant meal abroad, you will be paying a transaction fee. You may be charged a foreign transaction fee and a dynamic currency conversion fee. Credit card companies have different policies regarding overseas transactions.
Cash Advance Fee – every time you withdraw cash from the ATM using your credit card, you are charged a fee. The minimum charge is S$15, or a 6 percent interest rate on the withdrawn amount.
Minimum Monthly Repayment – some cards require cardholders to pay S$50 or 3 to 5 percent of the total balance, whichever has a higher amount. In addition, there is a 3 percent interest charged on the total balance of any amount that is overdue.
Late Payment Fee – if you are unable to make minimum payment by the specified due date, you may be charged between S$60 to S$80, depending on the issuing bank.
Overdraft or Over-the-Limit Fee – this fee is charged to cardholders when they try to make a purchase that exceeds the remaining balance on their card. Overdraft fees are usually charged per instance. This is why it is important to keep tabs on your spending, especially if you already have a low available balance. As with the other credit card fees, overdraft fee policies vary depending on the bank.
Annual Fee – this is the fee that your bank charges you for using the card. Issuers typically waive the annual fee for the first year to entice consumers to sign up. This fee is taken out of the available balance when it is due.
Could I Have Gotten A Better Card?
To know if you have the best card for your needs, you need to start using it and see how it compares to your other cards. If you feel like you are not getting the best out of it, then it’s time to think if you should hold on to it.
Most cardholders stay with their issuing banks because of reliable customer service. While perks and rewards are great, talking to someone and getting an issue fixed efficiently trumps all other benefits.
This rings true especially when you are abroad or are trying to make an urgent purchase. When an untoward incident happens, a friendly customer service representative who can help resolve issues in a matter of minutes is crucial. Always check credit card reviews to gain an insight on this aspect.
Moneywise, a lower annual percentage rate always sounds nice. You will be making purchases on your card and you need one that does not charge too much, bearing in mind the other fees associated with using a credit card.
Am I Protected?
One of the most important things to check when applying for a card is its protection features. What happens when your card goes missing? What are the issuer’s responsibility and coverage if you become a victim of fraud?
These may be hard questions to ask yourself, but the importance is undeniable. Recovery from identity theft and fraud can take years and cause serious damage to your credit score. One of the first things you need to ask the issuer is what happens when untoward incidents like these happen. What processes and measures are in place and what is the bank doing to protect clients against these?
What Happens When My Payment Is Late?
There is a penalty for missing your due date, and the amount depends on the issuer. Keep in mind that late payments can put a dent on your credit score, and future loans or credit card applications can be affected by it.
There are banks that are considerate in charging late fees, depending on the cardholder’s payment history. You can try and ask for it to be waived if you have been maintaining a good credit history and it is the first time you have missed a payment.
Creditors report the late payments to the credit bureaus. The submission of a report depends on the policy that the issuer is following. This means it can be reported immediately–in 30 days, or in some cases, 60 days. It is best to ask your bank for the due date and put a reminder on your calendar to ensure you do not miss it.
Being a responsible credit card user pays off, especially when there are fees associated to using one. You need to know the instances that can cause you to pay a fee or worse, get points deducted from your credit score.