CREDIT CRUNCH

From airline-affiliated cards to interest rates, Clement Huang shares essential advice on securing the best credit card deals

Is your card worth the annual fee?

Most credit cards charge annual fees, with costs varying based on the tier or brand. If you have a considerable credit limit, then your annual fee is likely to be higher too. In some cases, you may get your fee waived for a year or more. Some cards such as the BOC Singapore Airlines Visa Platinum card from Hong Kong do not charge an annual fee. Try contacting the bank to negotiate yourself out of such a fee and chances are that you will get it waived.

Weigh up the perks against the costs

As a Man U fan, you may be tempted to get a Manchester United-affiliated credit card for the promised exclusive discounts. In Malaysia, you would be paying a RM800 (US$250) annual fee for the Maybank Manchester United Visa Infinite card, but would you be utilising the benefits and discounts enough to justify this cost? Ask yourself that question before making a spur-of-the-moment decision.

Read the small print

Banks promote the benefits and rewards their credit cards can offer, but they almost always come with strings attached. HSBC India, for instance, states on its website that holders of its signature credit card are entitled to nine domestic flight ticket vouchers worth Rs 500 (US$8) each, along with 10,000 reward points. However, further examination of the terms and conditions reveals that cardholders would have to accumulate a single year spending of Rs 400,000 (US$6,464) or more to qualify.

Charge credit cards in home currency

When travelling overseas, merchants may ask if you would like your credit card to be charged in your home currency or the local rates. Check to see if your card offers a waiver of the foreign transaction fee. If it does, then opt to be charged in your home currency, as no interest will be charged and the amount will show up on your monthly statement in your home currency making it much easier to read. Credit cards that offer a foreign transaction fee waiver include those by Capital One. Otherwise, make sure you understand the fees involved. On its website, DBS in Hong Kong clearly states that,“The foreign currency transaction will be subjected to Visa/Mastercard/American Express applicable exchange rate on processing date plus 1.95 per cent as a Foreign Exchange Rate Adjustment”.

Don’t underestimate the smaller brands

Diners Club and Japan Credit Bureau (JCB) may not get the same attention as their well-promoted counterparts, but they shouldn’t be overlooked. JCB, for instance, is accepted in all Unionpay and Discover Network merchants in China and the US respectively.

As Diners Club customers tend to be frequent travellers, card privileges may include airport lounge entry, access to the Diners Club Travel hotel booking portal, and VIP airport services.

Shop around for the best rates

Interest rates vary bank to bank, so research the best deals. In Singapore, DBS implements a finance charge of 24 per cent per annum (minimum SG$2.5/US$2 per month) in the event that your statement is not repaid in full while Citibank’s finance charge for its Citi Clear card is significantly higher at 28 per cent, with a minimum monthly charge of SG$3 (US$2.4).

Consider airline-affiliated cards

Fly with an airline regularly? Then it might be worth your while to sign up for one of their credit cards. The Qantas Reward Premium American Express card from National Australia Bank enables users to earn 1.5 Qantas points for every A$1 (US$0.9) spent on eligible purchases, and free Qantas frequent flyer membership. Other credit cards offer air mile conversion – but at a cost. Standard Chartered Hong Kong, for example, offers mileage redemption services through its 360 Rewards programme, but charges HK$300 (US$39) for each transaction.

Be wary of interest-free installments

Many merchants offer installment plans for purchases, but while some banks may promote the installment offer as “zero per cent interest fee”, many of them charge a handling fee for the service. Moreoever, zero per cent does not mean no fee at all. China Construction Bank (Asia), for example, charges 0.29 per cent for each installment loan made. Again, read all the fine print and make sure that you know all the charges involved.

Wise up to security issues

Every time you hand your card to somebody else, you run the risk of compromising your security. On March 2012, credit card processor Global Payments reported that it had suffered a security breach in which intruders had gained access to thousands – possibly millions – of credit card numbers worldwide. Check your bank statements regularly to ensure that you haven’t been charged for any unauthorised transactions.

Try to avoid cash advances

It may be tempting to get a cash advance on your credit card if you’re a bit strapped for cash, but every time you do so, you will be instantly charged a handling fee, usually at 2-4 per cent of the amount drawn. Interest will also be calculated immediately, without grace period, and the rate is usually higher than that charged against purchases. Banks sometimes offer to waive the handling fee during promotional periods, but you would still be paying high interest rates.

Understand loyalty to card brands

Frequent China travellers take note: merchants in China favour the country’s Unionpay card over global brands such as Visa and Mastercard. The emergence of the Chinese economy has also led to the steady growth of Unionpay users globally. According to the company, 65 banking institutions across 17 overseas markets have issued Unionpay cards locally, and the brand is now accepted in 141 countries and regions outside China.