There are few better things in the world than slipping in a brand new, shiny, scratch-free credit card into your wallet. That’s exactly the seduction of that little piece of plastic—you instantly feel like a million dollars because you think you can buy anything your heart fancies.
Before you get carried away, though, let’s take a look at a few questions you might have forgotten to ask yourself in the excitement of getting a new card.
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Why am I getting a credit card?
If you’ve never had a credit card before and were able to pay your bills and buy your necessities without problems, you probably shouldn’t have a credit card in the first place. The only reason you should own one is because you need it.
A good reason to own a credit card is for emergencies — and we’re not talking about shoes on sale here. Another good reason is if you want to make big-ticket purchases that are otherwise impossible to do with cash, like a powerful laptop or home appliances that you can pay on installment.
How much will it cost me?
You may have been drawn in by the promise of a zero annual percentage rate (APR) when you signed up for a credit card. It’s probably a good idea to call your bank representative and ask if it was just an introductory rate, how long it will last, and how much the regular APR is, because that’s the rate you’ll have to live with for the rest of your card’s existence, once the promotional offer ends.
Also ask how much the annual membership fee is and if this can be waived occasionally, plus how much you’ll have to pay in late fees, just in case.
Could I have gotten a better card?
It only makes sense not to take the first card that your bank offers to give you. Again, this is a business, and they’ll want to earn as much money from each client as possible. It’s likely that you’re being offered a card with high interest rates and high annual fees.
It’s recommended that you shop around and see if you can find a credit card that offers lower fees and a higher credit limit. It’s best to compare the rewards programs, too—a provider might have a very attractive miles system, but if you hardly ever travel, then this might be useless to you. You might be better off with a good cash back program.
Am I protected?
You may do everything you can to avoid getting your card details stolen and used without your approval, but thieves are constantly finding ways to up their game. Now is the time to ask your bank to see if your card comes with fraud protection. Some cards will allow you to not pay for charges that you report as fraudulent until a thorough investigation has been conducted.
What Will Happen If I Fall Behind on Payments?
It’s uncomfortable to contemplate, and you probably think it won’t happen to you. However, no matter how responsible you are, something unexpected can set you back financially.
When this happens, banks offer programs that let you pay back your debt on terms that are more manageable. They can give you lower interest rates and low monthly payments.
It pays to know what resources you can fall back on in case the worst happens, instead of having to scramble for it when you’re already stressed with debt.
Make sure to ask yourself these questions first before you apply for a credit card and never have to worry a day in your life about keeping up with debt or wasting money on interest payments.
With a goal to help Filipinos lead healthier financial lives, Moneymax regularly publishes tips and tricks on personal finance and lifestyle, among many other topics. For more finance-related news and articles, follow Moneymax on Linkedin.