What credit card do you take up? Is cashback or balance transfer a better option? Well, this depends on your lifestyle and the kind of spend you put on your card. There is much more to a credit card than just the benefits and the rate. You need to know if you can save on your spend through features such as cashback and balance transfer. But you also need to know that some banks have a limit or a cap on how much you can earn in cashback monthly and that balance transfers often carry a fee. We will show you through our “Compare To Save” series, how you can compare credit cards to save money and what you need to know to pick the right product.
Save by comparing: cashback on your credit card
Cashback cards give you a lump sum amount of cash every month on your spend including on supermarket purchases, utility bill payments, air plane tickets, school fees and entertainment. This is particularly useful if you make regular monthly payments with your card and are able to pay off the outstanding balance before your next statement. The savings you make in this case can add up over the months.
For example, if you regularly make monthly purchases of AED3,000 at a supermarket, you could get between 1% and 5% back in cash depending on the issuing bank’s offer. But before you rush to take out a cashback card and start spending, be aware that banks place a cap on the maximum amount you can get back in cash. Find out this information in advance!
Save by comparing: balance transfer
Are you trying to pay off your credit card but unable to keep up with the interest payments? If so, a credit card with balance transfer and zero interest could save you a considerable sum of money by providing you with an “interest break”. Say for example that you have a card with an outstanding balance of AED20,000 charging you an annual interest rate of 30%. By transferring the outstanding amount to a credit card with balance transfer, you can avoid paying interest on the amount and pay off your card easier – provided you pay it all off within the zero interest six month period. One thing to bear in mind however, is that most credit cards with a balance transfer option will carry a balance transfer fee. This is usually a percentage of the transfer amount and varies from one bank to the other.
So compare the transfer fees by issuing bank. If this is lower than the interest you have to pay on your current card, consider a credit card with balance transfer. Remember that you should always avoid financially overburdening yourself and make sure that you are able to pay off the new card before the deal ends.
[Related: The pros and cons of 0% balance transfers]
Editor’s tip: when choosing a credit card, it is important to think of long-term savings on offer and compare them. Ask about cashbacks and balance transfers so that you know you are getting the best deal on your card. If you already have a credit card, always check that your debt-to-burden ratio allows you an additional card and that you will not overstretch yourself! For more tips on how you can save money by comparing, follow us on twitter and check our #CompareToSave series