As a general rule, you should ask yourself the following questions when applying for a credit card:
Why do I need/want a credit card?
This will help you decide what features you want your credit card to provide. You may need to transfer balances between cards and will therefore want a card with a special interest rate for transferring, or the card may be needed for business purposes. Being able to earn rewards may be a huge incentive, especially if you already own other credit cards.
How much do I need to charge at one time?
You may need a card which has high or no spending limits. If this is your first credit card, you may wish to choose one with a more modest spending limit.
How do I want to pay back the charge?
The entire balance each month or in portions?
Do special offers interest me?
You need to decide whether these are important to you.
Which situation suits me best?
- If you pay the balance of your credit card off in total each month, then a low interest rate is not as important as having a card which has no annual fees or additional member and credit card benefits. Similarly, if you will be able to pay off the majority of the bill each month, a low interest rate is less of a consideration.
- However, if you are only able to pay a small portion (or none) of the balance off each month, and the rest will be carried over to the next month (thus being subject to interest), make sure you choose a card with a low interest rate as its main feature. Aim to pick a credit card which has a fixed rather then low introductory rate. The difference between a 5% APR and a 12% APR can be great if you have a large balance, or if you will take a long time to pay it off.
- If you have an existing debt that you want to transfer, make sure you choose a balance transfer card which offers a 0% transfer fee and a lower APR than you had on your previous card(s).
- If you have a poor credit rating or history, opt for a secured card until you can improve your ranking.
