How to pick the best credit card for you

Posted at 04/26/2014 1:04 PM | Updated as of 04/29/2014 9:36 AM

MANILA, Philippines – Before deciding to apply for a credit card, consumers should first understand their spending patterns, financial adviser Salve Duplito said.

On ANC’s “On The Money,” Duplito said the common mistake of credit card applicants is signing up for the freebies rather than its long-term benefits.

She said that in order to maximize the use of credit cards in the long term, spending patterns and needs should be identified first before choosing from a regular, premium or rewards type of credit card.

“There is no use getting a card that gives you travel perks and access to members only perks overseas if your main expense every month is groceries,” she said.

A regular credit card is good for first-time card owners and people who are not interested in perks and do not intend to pay the outstanding balance in full.

Regular credit cards have lower credit limits and monthly interest rates, lower or no annual fees, and no frills or incentives.

“Get this only if you are a first time cardholder and fresh out of college. If you aren’t, you should know better than to revolve your credit,” Duplito said.

Premium cards, on the other hand, are for people who like prestige and can pay their bills in full ever month.

Premium cards have higher credit limit, higher monthly interest rates from 3 percent to 3.75 percent, higher annual fees of P2,400, and offer perks like product warranty, travel insurance, and emergency services.

“This is how you get more with less,” said Duplito.

Rewards cards are for the more credit-savvy consumers who wish to avail of rebates on air miles, turn spending into travel privileges and get rebates from auto companies, gas, and department stores.

Duplito also suggests choosing a card that has no annual fee and longer grace period.

“Note that most banks will allow you to waive your annual fees if you meet the minimum requirement,” she said.

Duplito noted that before deciding to get a credit card, you should first develop a healthy aversion to paying interest, late payment fees and penalties.

Once you start using the credit card, track your spending using an app like Toshl Finance and tag each item if you paid with your credit card to avoid “bill shock.”

“Educate yourself about the rewards and perks, if you don’t, you’re throwing real money down the drain,” Duplito added.