WHEN TO APPLY FOR A CREDIT CARD

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WHEN TO APPLY FOR A CREDIT CARD

Which Credit Card is Right for You?

If you’re in the market for a new credit card, there is a bewildering choice of cards to choose from. So how do you decide on the card best for you?

Here are some factors to consider:

What kind of payer are you?

The most important question to answer is do you pay the balance every month or do you leave a balance on the card.If you pay every month, then you can go for incentivised offers. If you leave a balance, then you need to look at the APR on the card. If you know what your typical credit card balance is, look at the illustrations given by the card issuers to give you a guide as to how much you would have to repay over time.

Look at the Interest

Even if your card may come with $0 interest balance transfers rate, there are other rates that could cost you. For instance, look at the interest rate on the purchase of other transactions and remember any payment you make are likely to pay off the transfer balance first while any new spending accrues interest.

Fees

There are 3 types of fees associates with credit cards:

  • Cash withdrawal fee like withdrawing cash at an ATM, charged at about 2% of the transaction.
  • Late payment fee.
  • Over limit fee.
Cashback Offers

Some credit card deals offer annual cash back for people who clear their balance every month. However, if you don’t clear your balance, the interested charged will wipe out any cash back gains. There are also reward point schemes that allow card holders to earn money from their spending.

These are the top 10 types of credit cards you can choose from:

  • Standard “plain vanilla” credit cards – no frills, no rewards with standard revolving balance up to a certain credit limit.
  • Balance transfer credit cards – transferring high interest rate card to a lower interest rate card for a period of time.
  • Rewards credit cards – rewards on purchases that include cashback, points and travel.
  • Student credit cards – designed specifically for students with no credit history. Some have rewards and low interest rates.
  • Charge cards – do not have a pre-set spending limit with balances paid in full every month. Late repayments incur a fee.
  • Secured credit cards – are for people with poor credit history who apply using a refundable deposit that matches the limit. It could also be used to improve credit score.
  • Subprime credit cards – for people with poor credit history and fast approval. Fees and interest rates are higher.
  • Pre-paid cards – use funds to load money onto the card and that amount is spent on the card. Used to improve credit score.
  • Limited purpose cards – used at specific locations, like store cards and gas credit cards.
  • Business credit cards – used for business use only which typically separates business expenditure from personal expenditure.

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