How to choose a credit card

Do you pay in full every month?

Many consumers choose to pay their credit cards in full each month. They use credit cards as a convenient way to track their spending and to make purchases without using cash or cheques.

For these card users, the interest rate on a credit card may matter less than the size of the annual fee and the rebates they earn when they use the card. Cardholders who pay the balance in full each month might want to consider a co-branded card. These cards may have relatively high interest rates, but if you pay your bill in full, these rates may not affect you. These cards also provide extras such as rebates, cash rewards, and free or discounted merchandise. But beware that the extras may not last the lifetime of the card.

Do you plan to maintain a balance?

Some credit card users regularly maintain a balance on their cards. Most card users always pay more than the minimum and they shop for the cards with the lowest rate in order to minimise the amount of interest to be paid every month. Shopping for the lowest interest rate is generally a good strategy for users who expect to carry a balance from month to month.

Do you need a Gold or Platinum Card?

Gold and platinum are the premium tier of credit cards, offering a blend of high credit limits and exclusive benefits. Issuing banks usually require gold and platinum cardholders to meet higher standards of income and credit worthiness.

The cards sometimes have higher interest rates, so if the value-added enhancements of a gold or platinum card are attractive to you, you may want to pay the balance each month to reduce your cost of credit. The higher credit limit and other perks offered to users of gold cards are especially attractive to frequent business and/or leisure travellers. Typical value-added services include rental car damage coverage, travel accident insurance and an extended warranty on items purchased with the card.

Platinum is another choice from the credit card menu. Platinum cards may provide an even richer package of perks than gold cards, and the qualifying standards may be set higher.

Some charge an annual fee. It's important to consider a card's terms and ask yourself which perks you'll really use before committing to gold or platinum.

Is a co-branded or affinity card fits for you?

Co-branded and affinity cards carry the name of a third party on the card, in addition to the name of the bank or financial institution that issued the card and the card brand. Both co-branded and affinity cards offer additional value from each transaction made with the card. The difference is who benefits.

Co-branded cards

With co-branded cards, you typically benefit by accumulating points for discounts with every charge processed. Airlines pioneered the co-branded concept more than 12 years ago, awarding tickets, upgrades, and discounts based on frequent flier miles earned for charging tickets to the airline's co-branded credit card. The trend has since caught on and spread across various sectors.

There are many co-branded cards issued by banks in the Middle East, with partners ranging from department stores, airlines, travel agencies and retailers.

Today in some countries, as high as 35% of all cardholders have a co-branded card. Co-branded cards sometimes have no annual fee and higher credit limits, but they may also have higher interest rates and annual fees than regular credit cards.

If you usually carry a balance on your card, you need to determine if the rebates you earn are worth the higher interest.

Affinity cards

With affinity cards, a third-party organisation, an alumni association or often a charity or a museum, for example receives a portion of each transaction made with the card. Some affinity card partners, like professional sports teams or environmental protection foundations, may also offer perks like discounts at selected stores or a free gift with the first purchase you make with the card.

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