How often have you been accosted by salespeople in a shopping mall enthusiastically waving credit card registration forms at you? With so many credit cards being offered these days, you may be tempted into signing up for more than you actually need. Whether you are hunting for your first card or thinking about getting a second or third (or fourth!), remember this:
To promote their credit cards, issuers often offer special gifts. Do not be swayed just because there is a chance you might win a brand new car or a flatscreen TV if you sign up. The offers usually come with terms and conditions. Read and understand them carefully. Note what the penalties are for not complying with the conditions that have been set.
Shop around for the best bargain. These days, many credit card issuers do not impose joining fees or annual fees for a certain time period to attract more applicants. However, do note that there are expiration dates for these offers. The normal rates that apply after that are often stated less prominently – in smaller fonts and possibly at the reverse page of the application form.
Finance or interest charges
Your credit card issuer will impose finance charges if you do not pay up your outstanding balance in full after the interest-free period. If possible, settle it in full to avoid having to pay more.
Most credit card issuers allow a 20-day interest-free period from the credit card statement date. Try signing up for credit cards with longer interest-free periods to settle your balances in full without incurring finance charges.
Cash advance / balance transfer
Fees for cash advance or balance transfer can be quite high – ranging from 3% to 5%. Look for credit cards with lower cash advance/balance transfer fees. Use your credit card to withdraw cash only as a last resort.
DO NOT FORGET THE TERMS & CONDITIONS
Read the T&C carefully when applying for a credit card to understand the following:
- The various charges imposed
- Usage of the credit card
- Rights and responsibilities of the card holder and card issuer
- Repayment terms and liability for unauthorised transactions
- Privacy information
But do not stop there as there may be changes in the policy, rates and T&C from time to time. These are often announced in your monthly credit card statement, so do read them carefully.