A credit card is quite similar to a chainsaw – both are handy tools that can inflict damage when used the wrong way. When looking for these items, you need to know the rules for wisely and safely using them.

Selecting a credit card is a personal decision.It must be tailored to your specific goals and spending habits. Most importantly, it’s crucial to compare credit cards in Dubai (or anywhere in the world) to ensure that you get the best one for your needs.

To help you choose the best credit card, here are four factors to consider.

1. Your purpose

How you plan to use a credit card can point you towards the correct type to get. Will you use it for emergencies or to pay for necessities? Do you intend to pay off your dues each month without fail, or do you expect to carry a balance?

If you intend to carry a balance, choose a card with the lowest possible interest rate. This way, you won’t suffer from a huge charge. But take note that you should pay your bills in full and on time whenever you can to build strong credit. 

If you aim to earn points from your purchases, your go-to card is a rewards credit card. You can get points on different spending categories like groceries, travels, hotels, and dining. Maximize your earnings by choosing a card that provides bonus points for the things you often spend on. For instance, consider getting one that earns bonus points on airfare and hotels if you frequently travel.

A cash back credit card is your best bet for earning rewards. You can earn 1-3% cash back on your purchases from both local and international merchandisers, which can directly be debited on your account.

Looking into your spending habits will help narrow down your choices. Find a credit card with features and capabilities that align with your preferences and spending habits so you can get the most out of its use.

2. Fees and penalties

Aside from penalties on late payments, credit card issuers may also charge fees for certain transactions, including cash advances and balance transfers. Some may even charge you for making payments by phone or requesting a credit limit increase.

So before applying for a credit card, evaluate if the fees are reasonable. Take note that there are cards without annual fees, transaction fees, and interests for at least six to 12 months. Stay away from cards with high penalties and unreasonable costs, even if these offer several attractive features.

3. Interest rate

The card’s interest rate is also a crucial consideration. It can be a variable rate or a fixed rate, often tied to another financial indicator. Opting for a fixed rate may seem like a better option since you will know how much it costs monthly, but this can change depending on several triggers. These include going over your limit and paying your bill late.

You should also check how the finance charge is calculated. Avoid getting cards that compute the balance using two billing cycles because you could end up with expensive finance fees. 

4. Credit limit

Your credit limit is determined by the card issuer based on several factors, including your payment history, income level, and credit score. The issuer will need to assess your ability to make repayments on time. 

Getting a card with a higher credit limit may seem like a favorable option, but if you feel that you can’t afford to pay it off, it is better to choose a card with a lower limit. Unless necessary, avoid maxing out your credit limit.

No single credit card is best for everyone. The right card for you will highly depend on your goals and lifestyle. So make sure to consider these four factors before applying for a credit card, especially if it is your first time.

AUTHOR BIO

VenkatMahadevan is currently the head of the Wealth Management and Branch Banking business for Citi’s Consumer Bank in the Middle East. He has 30 years of experience in banking and in Citi, having spent most of his career in various roles in consumer banking and especially in Wealth Management. He also has extensive experience in the various aspects of Off-shore Wealth Management. He has worked with Citi in India, USA and Singapore prior to moving to the UAE.