Got a wallet with enough slots to fit a 25-year-old kidult’s Pokemon card collection? Then you’ve already signed up for quite a few credit cards of your own.
When you pick a credit card to sign up for, your main question should not be how impressive the card looks on the restaurant’s bill holder. Here are four things you should actually be asking when you apply.
What are the benefits?
The majority of credit cards offer free membership for the first year or two, so it should cost you nothing to sign up for them. Still, being a cardholder of a credit card you rarely use can turn out to be a liability as you might accidentally end up paying annual fees later on if you forget to ask for a waiver.
So don’t sign up for a card just because you think it looks cool, or because the adverts claim it’s the perfect card for ladies/professionals/fashionistas/clubbers. Read the terms and conditions yourself to find out whether you actually want the benefits.
Rewards points may sound like a nice thing to have, but look through the catalogue to see what you can actually claim. Cash back tends to be more useful because anybody can use free money. Frequent flyer miles are most useful for those who travel often, because you can combine the miles from your credit card with the miles you’ve accumulated on your own flights to make better claims.
- Local Spend
- S$1 = Up to 1.2 Miles
- All Foreign Currency Spend including Retail and Online
- S$1 = 2 Miles
- Selected Online Hotel Bookings
- S$1 = Up to 10 Miles
Can you qualify for the benefits based on your spending patterns?
If you think a credit card’s benefits sound too good to be true, there’s a good chance they are. For instance, they might be offering you 5% cashback on all your spending… but only if you spend $2,000 in a billing month.
Obviously, they’re not going to advertise the spending requirements in big, bold print on their websites. You need to click through to the terms and conditions PDF document in order to read the exact requirements.
Based on your spending patterns, make sure you’ll actually be able to benefit from the card. If you only spend $800 a month, a card that requires you to spend $2,000 to receive the benefits is useless. If you have a main credit card that you already allocate 80% of your spending too, you’ll have a lot less to allocate to new cards.
Some promotions are only valid if you flash your card at certain times of day or days of the week. If the cash back on entertainment is only valid on weekdays before 5pm when you’re chained to your desk, it’s useless unless you plan to hand your card to your 15-year-old kid.
When do the benefits expire?
Anybody who’s been playing the credit card benefits game for a while knows that credit card benefits don’t last forever.
First of all, find out how long rewards points and air miles are valid. Some of these can have a pretty short shelf life of only 1 to 2 years, so if you don’t use them in time you’ve wasted all those thousands of dollars you’ve spent to get them.
Next, most of the benefits themselves will remain in force only for a limited time. That generous cash back on your online shopping might actually be expiring in December 2017.
What are the credit limit and balance transfer fee?
If you are paying your credit card bills in full every month by Interbank GIRO like you should be doing, you don’t need to care about this.
But if you’ve been known to spend a bit too much at times, know what your credit limit is so you don’t end up standing red-faced at the FairPrice checkout counter with 25 aunties in the queue glowering at you.
Also, ask the bank how much a balance transfer costs. If you have difficulty paying off the balance on one card, you might want to pay for the bill using a card with a lower interest rate. However, you could be slapped with a balance transfer fee of about 2% to 3% of the amount you’re paying. You might also have to pay other penalties, or be subject to a higher interest rate after a period of time.
What factors do you consider before deciding to apply for a credit card? Tell us in the comments!