Some cards are advertised as being free for the first year, or even free for life. Do work out, though, if you’ll end up paying more in interest charges – if you’re likely to maintain a balance – if the rate is higher than that of cards that do charge an annual fee. Premium cards often charge a higher annual fee than regular cards but also often offer a greater range of benefits; you’ll need to establish whether the benefits you’ll get outweigh the annual cost of the card.
Monthly fees and charges
However prudent we are with our card usage, life happens, and occasionally we may be late with a payment or miss it entirely. For safety’s sake, it’s worth checking what fees and charges you’ll incur if the worst happens. Some banks will increase the interest rate once you’re late with a payment or miss it, and it’s likely you’ll also be charged late or missed payment penalties.
Your choice of credit card shouldn’t be based on rewards but if the rates and fees are competitive, then you need to ensure you get the rewards that fit your lifestyle. Credit cards in the UAE offer free games of golf, free gym memberships, air miles, free valet parking and much more, all of which could save you serious money if you’re clever.
Transferring a balance
If you have an outstanding balance on your current card, it might be worth looking for one that offers the possibility of transferring the balance so you can shop for a lower interest rate or even an interest-free period. Do check, though, that you won’t be stung by high processing fees that might make it a futile exercise. Find out what you’ll be charged by the new card provider to ensure fees won’t swallow up any potential interest-rate savings and do some simple calculations to make sure the savings outweigh the set-up costs. Or, consider consolidating credit card debt into a personal loan – but only if you know you won’t simply rack up the debt on the card again.
Banks and finance houses quote interest either as a monthly rate or on an annual basis. Make sure you’re comparing like-for-like when you’re shopping around to find the cheapest, and remember that some banks may vary rates according to your annual salary, who your employer is, or whether you’re already a customer. It’s worth asking if the card provider is willing to negotiate on rates, especially if you’re transferring a large balance or will be using the card a lot.
The golden rules of credit cards
If you couldn’t afford it without the credit card. don’t buy it with the card. The only exception is if you’re using an interest-free offer to spread payments for a large purchase.
Pay your balance in full each month. Making only the minimum payment is a sure-fire way to rack up expensive debt, as you’ll only be paying off the interest on your purchases and a small amount of the balance outstanding.
Set up automatic payments. To minimise the risk of forgetting to make payments when they’re due – and incurring fees and charges – set up automatic payments so the money is deducted straight from your bank account and paid to your credit card.
Set yourself a limit you can afford to pay off. Your card will likely have a limit set at the standard maximum the bank will allow for your salary. If you’re worried this might be too tempting, ask for it to be lowered to a level you’re more comfortable with.