Shop around before selecting the best card for you

Sudibyo M. Wiradji The Jakarta Post Jakarta

With the increasingly tight competition in the credit card market, card issuers are vying for new consumers by making various offers. One of the most attractive offers is the "balance transfer" facility.

Many issuing banks offer the balance transfer facility as part of their efforts to lure new credit card holders from other issuers.

With this facility, new credit card holders who stopped their membership in other banks and then transferred their credit balance (outstanding credit charge) from the old cards get a lower interest rate, generally half the normal rate, for six months. Besides the low interest rate, the new credit card holders are also exempted from membership fees for the first year.

In attempting to lure new members, credit card issuers also offer many other incentives, such as free accident insurance coverage, price discounts at selected retail outlets, a grace period of 50 days and points rewards that can be redeemed for shopping vouchers or gifts.

Financial experts, however, warned that good rewards are not always good for customers. There is nothing free in business. Rewards and prizes mean additional costs for the banks and it is the customers who have to pay for the additional burden.

Selecting the best and the most reliable card is certainly not an easy job. Many things should be considered.

According to banking analyst Elvyn G. Massasya, before agreeing to open a credit or charge card account, prospective consumers should consider such basic factors as their own financial circumstances and more importantly the status of the credit card issuer.

Financial circumstance should be considered as a cardholder is obliged to pay the bill on the due date. "A cardholder should have the ability to manage the debt," he said.

With regard to issuers, Elvyn said, prospective consumers are advised to study several things related to the issuer, including its credibility, the interest rate, grace period and benefits.

According to Elvyn, the credibility of the issuer should be one of the priorities in choosing the most reliable and secure credit card because credible issuers have more experience in this area. "In addition to having a well established administration system, the issuers should be backed by dedicated and professional staff, and have set up partnerships with many merchants," he said, adding that having many merchants meant that consumers would have access to more shops accepting the issuer's credit card.

A competitive interest rate is another consideration, he said. "A relative low rate is good but much more important is the consistency of the rate in the sense that it does not wildly fluctuate so that you can anticipate how much your bill will be on the due date," he said.

Elvyn said that if a consumer pays his bill promptly, then he will not have to care too much about the interest rate. "But if you happen to be indisciplined in paying your bills, then the credit card that offer the lowest interest rate should be the priority," he said.

But, he added, "You should be careful with a credit card that offers too low an interest rate because, as has frequently occurred, the low rate offer is only temporary in nature. The issuer might later raise the interest rate higher than that offered by their competitors without prior notice. When this happens to you, and you still have bills, you can imagine the burden you will have to bear," he said.

The grace period should also be considered. Knowing whether a card gives you a grace period is especially important if you plan to pay your account in full each month. With the grace period, the card issuer may impose a finance charge from the date you use your card or from the date each transaction is posted to your account. "The longer the grace period you have the better because you will have longer to pay the bill," he said.

Elvyn said several issuers also offer other benefits, such as free insurance coverage. "So, it would be advisable for you to ask the issuer the terms and condition that have to be met to get such insurance benefits.

Many credit card holders are also tempted to use their credit cards in order to get bigger points rewards through which they will get more entry numbers for a prize draw some time the future involving, for example, an expensive car or a big cash prize.

"Uncontrolled use of your credit card may lead you to be trapped in a huge debt spiral. Therefore, it would be wise to avoid using a credit card to get rewards," he said. "Thus, when you choose a credit card, it would be advisable for you not to make the rewards your primary consideration," he said.

Generally, there are three kinds of credit cards on the market - Platinum, Gold, and Silver or Blue. Psychologically, gold and platinum are preferable because of the prestige factor.

According to Elvyn, choosing the kind of credit card should be based on the utility of the credit card itself. "In fact, the issuers take several factors, such as an applicant's level of need and his debt repayment capability, into consideration when issuing credit cards," he said.

"If you insist on getting a gold card, then this could get you in trouble because, besides requiring a higher membership fee, a gold card has a higher credit limit. With this higher limit, you have the potential to end up in huge debt because the gold card is beyond your financial means," he said.

Shopping Tips Keep these tips in mind when looking for a credit or charge card.

-Shop around for the plan that best fits your needs. -Make sure you understand a plan's terms before you accept the card -Pay bills promptly to keep finance and other charges to a minimum -Hold on to receipts to reconcile charges when your bill arrives. -Protect your cards and account numbers to prevent unauthorized use. Draw a line on blank spaces on charge slips so the amount can't be charged. Tear up carbons. -Keep a record -- in a safe place separate from your cards -- of your account numbers, expiration dates, and the phone numbers of each issuer to report a loss quickly. -Carry only the cards you think you'll use.