Tuesday, October 21, 2008

My First Credit Card

"How to find the right credit card?" is the question which haunts every credit card hunter. Though there is enough said and heard on why one would need a credit card, this is exactly the question that you should ask again when hunting for the right credit card for yourself. To make the things easier for you, here is the first set of questions which you need to ask even before you start hunting for your first credit card:

1. Do you need the credit card just for convenience sake or is it more out of necessity for credit? This will help you determine what aspects/features to look for in a credit card e.g. if it's just for convenience sake and you have plenty of cash in your bank, then you will probably always be making monthly payments in full (you might set up direct debit from your bank account to make your credit card payments automatically) and hence APR might not be on your priority list. However, if you are not planning to make full monthly payments all the time, then APR is one of the most important things on your list.

2. How much do you intend to spend every month using your credit card? Based on how much you intend to spend, the credit limit will become a higher priority for you. Different credit cards offer different credit limits.

3. Do you frequently shop with a big department store or do you fly a particular airlines a lot or do you have any special shopping interest? If you do, then you might like to go for a co-branded card. Most of the big department stores and airlines have such tie-ups with credit card companies where-in you get discounts or extra miles or extra credit card points when you use your card for payments.

4. Are you a student? There are special credit cards for students which are offered by various credit card companies. These are called Student credit cards. So if you wanted to start building a credit rating early in your career these are the ones suited for you.

5. Payment mode. This could be another factor influencing your choice of credit card. Whereas some companies accept almost all modes of payments, other might be choosy.

6. Your income, age and other details. When going hunting for a credit card, you need to keep these details in your mind too. Some companies keep a minimum criteria or a qualification which you need to fulfill before you can apply for a particular credit card with them. So, though it's important that you like the credit card or the credit card company, it's equally important that the credit card or the credit card company likes you too.

7. Do you travel a lot? A lot of credit card companies have specific offers for frequent travelers. Some have tie-ups with hotels or rental agencies and can get you a discount if you use their credit card. If most of your travel is to foreign lands and you intend to use your credit card in other countries, you might be interested in knowing the commission charged by the credit card company for foreign currency transactions. Be careful, some companies charge no commission but offer pathetic currency conversion rates. Also, some credit cards may have some amount of free travel insurance on them which you might want to consider as well.

8. Interest free period. Also, it's a good idea to compare the interest free periods offered by various credit cards. This, together with the APR rate, might become handy in emergency situations when you are not able to pay the full amount due on your credit card.

The time invested initially in evaluating your needs, before finalizing a credit card, will pay you rich dividends in the long run. So invest some time on this before making the move.

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