You would have certainly received plenty of phone calls from telemarketers asking if you are interested in credit cards. You may not be looking for a credit card, and so you hang up such calls quickly. But assuming that you are interested in a credit card, here’s what to ask to make sure you get the right deal.
ASK FOR PROOF OF OFFER
Often, the credit card sales pitch contains an offer that may sound too good to be true. It’s your right to know that what’s being offered is real, and will be beneficial to you. Sometimes, customers may not understand an offer completely and buy a card that doesn’t suit their finances or lifestyle. They may even be mis-sold a card, i.e., they may get a card minus the offer that was verbally promised. For example, you may get a verbal assurance of zero annual charges, only to be shocked by a large charge in your statement later. It’s not enough to settle for the verbal assurances of the telemarketer. Ask for proof of the offer. Also verify the offer with online listings of the same card.
ASK WHAT YOU’RE BUYING
The sole objective of the telemarketer is to make the sale. You must ascertain what he’s selling will actually be beneficial to you. For example, you may be on the hunt for an air miles card because you’re a frequent flier. But the telemarketer is telling you to pick a lifestyle card where you get discounts and rewards for shopping and eating out. Make sure you get a card that helps or improves your lifestyle.
DON’T SIGN IN A HURRY
The marketer may offer to send a person over to your home to get your signatures and collect your documents. But you should not agree to this in a hurry. A credit card application requires the issuing bank to check your credit history. This is what we call a “hard inquiry” into your credit history. With each new hard inquiry initiated by the bank, your credit score comes down a little bit (It will rise again with regular repayments of your loans and credit cards). This process is initiated only when you sign the card application. Therefore, sign off only when you’re convinced about the card.
CHECK THE ANNUAL & RENEWAL CHARGES
Often, you’ll get the offer of a lifetime free card. This means you don’t need to pay an annual fee for holding the card. Typically, these fees are applied on high-end, premium credit cards which are feature-rich. Sometimes, the annual charges are also waived off in certain conditions. If the offer is for a lifetime card, double-check it.
CHECK THE INTEREST RATE
When you use your credit card for PoS or online transactions, you have an interest-free period in which you will be charged no interest on your dues. After this period, if you haven’t paid dues, you will be charged a hefty interest rate. Annualised, this rate of return can easily be upwards of 30 per cent. Therefore, check if the interest rate on the card you are being offered is competitive with other credit cards.
CHECK ALL PENALTIES & CHARGES
Don’t be taken aback by the various penalties and charges that come from using a credit card. Take time to understand the charges. For example, there’s a hefty interest rate if you use your credit card to withdraw cash from an ATM. There may be a charge if you shoot your spending limit. There may be late payment penalties if you fail to make the minimum payment on your dues. If you use the card abroad, there may be a forex charge. Taking half an hour out of your time to study these charges would save you from hassles later.
The writer is the CEO of BankBazaar.com