Tips on shopping for credit cards
With so many credit cards being offered, it is important for you to get the credit card that best suits your needs.
Here are some tips for shopping for a credit card or evaluating the credit cards you already have:
- Promotional gifts
The credit card issuers may offer you promotional gifts such as hand-phones, leather wallets, etc to promote their credit cards. However, before you apply, it is important for you to understand the T&C related to the offer. Pay attention to the conditions set for the promotional gifts and the penalties for not complying with such conditions.
- Teaser rates
In order to attract you, credit card issuers may temporarily offer lower fees and finance charges, or even waive them for a certain period. The promotional materials may highlight an attractive and low introductory interest rate in a large, easy to read font size, sometimes without expiration date. The interest rate in effect after the promotion period is disclosed much less prominently, i.e. in a smaller font size and may only appear on the reverse side of the application or on the last page of a multi-page promotional material.
You should understand the T&C for the promotion and be aware of when the promotion period expires as you may be charged the regular or substantially higher fees and charges after the promotion period ends.
- Finance charges, fees and interest free period
Credit card business generates profits mainly from finance charges. You will be imposed finance charges if you do not settle your outstanding balance in full after the interest free period. However, for cash advance and balance transfer, you may be charged a fee as well as finance charges starting from the transaction date. Pay attention to the fees for cash advance and balance transfer transactions, the finance charges and the interest free period offered by the credit card issuers.
a. Interest free period
Credit card issuers offer an interest free period, usually 20 days, from the posting or statement date up to the due date, except for cash advance and balance transfer. Therefore, shop for credit cards that offer longer interest free periods to settle your balances in full without incurring finance charges.
b. Fees on cash advance/balance transfer
Most credit card issuers impose a cash advance fee on top of finance charges when you use your credit card for cash advance or balance transfer transactions. The cash advance fee may vary between 3% to 5% of the amount. Thus, always consider applying for credit cards which has lower cash advance/balance transfer fees.
Reprinted with permission from BankingInfo (A Consumer Education Programme)
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