In this article, we are going to talk about choosing the best credit card for yourself. With so many banks offering credit cards with varying benefits, it can surely be confusing to choose which one would be the best fit. The easiest way to know which card is best for yourself is by having a closer look at your spending habits. What do you use the credit card for? Do you travel a lot? Are you looking for extra coverages on your credit card like insurance? The answers to questions like these will determine the credit card that is best for you.
Cashback Credit Cards: Perfect for Everyday Spending
Let us take an example of a person who only uses his credit card to buy groceries from his favorite grocery store. He also uses the card a lot at a nearby coffee shop. He does not travel much and does not eat out or go to movies often. What he should be looking for is a cashback card. A cashback card is a card that offers money back on everyday purchases made on the credit card. The cashback reward normally varies from between 1% of the spend to around 3%. It surely adds up, considering the inflated cost of groceries these days, and is yet another way to get some extra free money from the bank.
These cards are quite common and are offered by most banks worldwide. They usually do not have a remarkably high annual fee, but some of them, especially those with a higher cashback percentage, might have a nominal annual fee attached to them. Cashback can be divided by the type of purchase made, like a purchase from a listed & approved grocery store or an approved restaurant, and the respective cashback percentages would vary accordingly.
Travel Credit Cards: Ideal for Frequent Travelers
Another immensely popular type of credit card is the travel credit card. These cards are targeted towards frequent travelers, and the benefits associated with them are also ones that a traveler would love to have. The most common benefit offered by these cards is lounge access at the airport.
Travel can be overwhelming, involving long transit times at connecting airports or delayed/cancelled flights. In situations like these, cards offering complimentary lounge access are nothing less than a blessing to the traveler. Imagine having a 10-hour transit at an airport and being unsure of how you would be able to kill time. Not everyone is able to afford the overpriced items sold at airports, be it the duty-free shops or the luxury brands that are quite abundant at airports worldwide. Having a travel card with complimentary lounge access allows you to spend your time at a comfortable lounge with free snacks, Wi-Fi, and shower facilities. It sure will help you feel more comfortable and refreshed, which is particularly important on long-haul flights.
This is a premium benefit, and it comes with associated costs, such as a higher annual fee compared to cashback cards, but it sure is worth it if you are a frequent traveler. The benefits usually outweigh the associated costs in this case.
Travel Insurance and Other Benefits
Another particularly good benefit that you get with travel cards is travel insurance. When you are traveling to a country, you may have fears about the consequences of falling sick or having to be admitted to a hospital in a foreign country and its associated costs. In most cases, you simply do not know what would happen if you fall sick. Questions like, “Will I be able to get good medical care if I fall sick or have an accident? What would I be required to pay at the hospital? Would I be able to afford the medical bills?” These are all valid questions and are surely something to consider when traveling abroad.
Some premium travel cards offer medical insurance coverage for a fixed period, which is great and gives you peace of mind. Travel insurance, even if not covered by the credit card, is something a person must surely consider, given the multiple uncertainties involved when traveling to another country.
Another coverage that is gaining popularity nowadays with travel cards is lost or delayed baggage coverage. With airlines having busy schedules and multiple layovers involved when moving from one country to another, the possibility of your luggage being lost or delayed at your destination is quite high. Cards having this benefit offer monetary compensation so that you can have access to your important stuff that you need for your trip.
Say, for example, an airline lost your bag, which had clothes and other accessories that you needed to wear for an important meeting. Now, if you did not have any coverage, you would be spending money out of your pocket to buy those things. But if you do have the coverage for it, you would be paid money by the card issuer to make those purchases. Isn’t that convenient? Insurances offer peace of mind, and one never wishes to use them, but if an unfortunate incident happens, one would surely love having those coverages.
Other Credit Card Benefits
Other benefits offered by cards worldwide include free movie tickets, preferential treatment at airports, access to VIP clubs, discounts at restaurants, etc. One needs to choose the right card wisely to get the maximum benefit based on one’s unique spending habits and patterns.
Why Is It So Important to Pay Back Debt?
Another quite common question people ask is why it is so important to pay back debt on time and what happens if I fail to do so. Borrowing money has gained so much importance nowadays that it is not just a way to fulfill your current need for money. Borrowing money and repaying it on time, as defined by the lending policy and repayments, is especially important nowadays as it determines a person’s credibility and credit score.
Being responsible with debt and managing it well reflects well on one’s credit score, highlighted by a higher credit score. Why is a high credit score important? A good credit score gives an indication to current and future lenders that this person has shown good responsibility with debt—he/she has repaid the debt on time. This helps them get access to debt later much easier, as needs can arise anytime.
But it’s not just about current and future lenders. Employers look to hire people with good credit scores, and some jobs have a condition of a good credit score as part of the hiring process. If one fails to pay debt on time, the first thing that will happen is that he/she will notice a drop in the credit score. Secondly, if they still are unable to manage it down the road, much more severe consequences like cancelling of the loan or the loan being transferred to collection agencies can happen.
Hence, it is important to manage your debt wisely. Only borrow what you need to borrow, make a plan to pay it on time by managing your cash flow better, and prioritize needs over wants. Having debt is not a terrible thing if you are able to manage it well!