Questions to ask yourself before applying for a credit card

MANILA, Philippines – Owning a credit card doesn’t mean you’re richer than others who don’t possess it. In fact, it can lead you to more debt. It’s just that banks think that you are more capable of repaying them. But don’t get it wrong, a credit card is a great financial tool, only if you utilize it properly. Before you fill out that application form, it pays to ask a few questions to yourself:

Do I need a credit card?

If the thought of slipping in a brand new, shiny plastic card in your wallet excites you, plus the thinking you can buy anything you want in the world, then you’re on the wrong track. You might use the card for wrong reasons and could bring you in trouble, unbearable stress and debt. In that case, you don’t need one; just want one for whatever reason.

Also, if you are able to pay for what you need – like bills, daily expenses, etc. – with your own cash, check or debit card, you might not need a credit card in your life. Credit cards are of great use during emergencies and purchasing items you wish to pay on installment.

Signing up for a credit card because of the perks is a lame excuse. Sign up for a credit card only when you need one. Are you applying because of the rebates, rewards, or other promotions? Or is it because of the offers of a waived annual fee? All your reasons should make sense because your personal finance is at stake.

Is it right for me?

If you think you need a credit card and plan to go further, ask yourself if it suits your lifestyle. When you go inside a mall or in a gadget or shoes stall, do you think you can manage to pick only the things that you need? Or you think you can buy all the things that you see using that financial weapon without thinking twice for your repayment duties. Every swipe is a debt, or in Filipino, utang.

Consider your lifestyle and spending habits when applying for a credit card. If you don’t have much self-control, it will have a great impact on your financial and psychological well-being.

Am I ready to have a debt?

What do you think will happen when you don’t repay in time and in full? Interest – never-ending interest. The banks call it compounding interest, and you may call it your debt. The smaller the amount you repay this month against your balance, the greater the amount and interest it will incur in your next billing cutoff.

If you’re mostly likely paying the required minimum payment on your future credit card each month, it could take you a longer time to pay everything off, and then it will be marked as your debt.

Can I afford it?

Most financial institutions grant credit cards to those who are earning a stable income, preferably an employee of a company. Most of the time, the salaries of majority of employees in the Philippines are their sole source of income.

For sure, credit card purchases will hurt your cash flow in such a way that you need to tweak your way of budgeting. If you will be granted a credit card, some of your purchases will be through it which could be abstract at first. Do you think you can afford to sneak in another channel of expense in your salary?

Where do I plan to use the credit card?

Do you have a new home and you want to buy new appliances on installment basis? Do you want the points for your flights or for your shopping? Do you want a credit card to establish a good credit history? Compare all the credit cards available in the market and sign up for one that is suited to most of your needs. It is a great way of maximizing the benefits of your future card.

Is my financial state organized?

If you don’t have the full control over your expenses because of financial obligations, you run the risk of being drowned in debt. Hence, it’s not the right time for you yet to own a credit card. But if you think you have the power over yourself and manage your time and finances well, a credit card can be a great tool for you.

Before you sign the dotted line, seek guidance from everyone you know and do your own research. The last say will always be yours, so make sure it is the wisest one. – Rappler.com

Image of woman holding credit card from Shutterstock

MoneyMax.ph is an online platform for comparing financial and telecom products and services. It aims to give the power of smart purchase decisions back to Filipino consumers by providing everything they need to become financially savvy.