What
will I be using my credit card for?
If
you are going to use your card for the convenience of making purchases but
have no plans to carry a large balance then a regular no
fee card would fit your needs. If
you are a post-secondary student a student
credit card would suit your needs. The most important factors to consider if you are in this
situation is the interest rate charged by the card issuer.
If
you are going to use your card to make a large amount of purchases each month
than you may be better off with a gold card or a platinum card.
Some of these cards charge users an annual fee but they generally have
more features like travel insurance, and discounts on Rental Cars and airline
tickets. Generally they have a lower rate of interest than basic or regular
cards.
If
you make most of your purchases at a particular retailer
or gas company then you
may want to take advantage of special features offered by those companies like
the the ability to pay for large purchases on a monthly basis or the ability
to earn reward
points on some of theses cards. However
if you are going to carry a balance most of these cards charge a far higher
interest rate than regular credit cards.
Some interest rates are 28.8 % the highest rate legally allowed in
Canada, so be wary of keeping a large balance on these cards.
There
are many reward credit
cards issued by a variety of financial institutions towards different
ends. You can earn a percentage
of the purchases made on your card towards many different rewards.
Some of these rewards include rebates on a new car purchase, free
travel, free groceries and dozens and dozens of other programs.
If you find that one of these programs fits your lifestyle than that
may be the card for you. However
don’t get too carried away and buy things you don’t need or carry a larger
monthly balance than you are comfortable with in the desire to gain rewards.
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How
much credit do I need?
Different
credit cards have different maximum and minimum credit balances.
Generally Regular
and Student
Cards have
maximum balances of $500 to $2000
while gold
and platinum have higher balances. If you want a very high credit limit
of $5000 or more you will need to have a good credit rating, a relatively high
income, and should expect to pay an annual fee for your card. But
remember the more credit you have access to, the more possible it is to spend
more than you are comfortable with, so take care.
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Will
I pay off my balance each month?
This
is an important thing to consider when applying for a credit card. If
you know that you will pay off your entire balance each month then it really
doesn't matter what card you use as you will not be paying interest on your
purchases. If you know that you will not carry a balance then you can
consider reward
cards or
retail
cards
which offer the incentives you want. However if you are regularly
going to carry a balance on your card then the most important factor to
consider is the interest rate. Even a 2% or 3% difference in interest
rates will add up to significantly more interest costs to you over a long
period.
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What
features or reward programs would I value most?
If
you are going to apply for a credit card that offers incentives or rewards
it
is a good idea to consider what program is the best for you. If you want
to earn the larger rewards offered by the financial companies and retailers
that issue these cards you will have to spend a large amount of money in order
to receive them. So it is a good idea to consider this before you apply
for the card as it may take years and thousands and thousands of dollars to
earn the trip or discount on a new car that you crave.
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Am
I prepared to pay an annual fee for my card?
There
are hundreds of cards available that do not charge an annual fee so if you
decide to get a card that does charge an annual fee you should expect extra
perks that you value. For some that is a discount on car rental or travel.
Some cards cover car insurance on rental cars and insurance on purchases made
on the card. You should expect to have a higher credit limit and a lower
interest rate then with most regular cards. For many the perks are well
worth it, but if you do not plan on using your card often for large
transactions a card with an annual fee is probably not useful to you.
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Do
I want to transfer balances from my existing cards to a new one?
This
is a method that many credit card companies use to attract new card holders.
It is usually an excellent deal for consumers. Many introductory
rates are 5.9% or lower on balance transfers from existing cards. Most of
these low interest rates last for a 6 months time period but it varies.
The questions to consider when transferring your existing balances to a new
card are: What is the interest rate after the initial low APR period?
Does the low interest rate apply to purchases as well? If the low rate
does not apply to purchases as well as balance transfers do your payments on
the card go against the low interest transfers or the higher interest
purchases? There are more issues to consider but generally it is a good
idea to transfer existing balances to a new lower rate card but remember if
you do not cancel the cards you have transferred the balances from then you
will have more credit than you did before and you run the risk of accumulating
more debt than you can handle. So it is best to cancel your old cards
once you transfer the balances from them.
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