Credit cards have become vital financing tools in the way we go about our regular transactions. Not only do they eliminate the need to carry cash all the time, they also help you maintain a good credit score, provided you use the card judiciously. Throw in the interest-free periods, attractive rewards and convenient EMI features into the mix, and a credit card seems almost unbeatable at a time when there is a clamour for a paperless economy.
But with almost every financial institution coming up and extending their own credit card facility now, the confusion of an average customer is understandable. Ideally, a credit card with rewards and cash backs that seem to better the various compulsory fees attached to the card, should be the popular pick. Listed below are some of the important points that can help you zero in on your credit card, especially if you are a first-timer.
- Know what you are taking the credit card for
Several credit cards offer bigger rewards and other complementary benefits on a particular type of transaction. For instance, while a few will give you higher reward points on fuel transactions or other routine expenditures, others might fetch you cashbacks and air miles on flights and hotel accommodation. Therefore, it is important to go for a credit card that is a custom-fit for your needs and spending habits.
- Read between the lines (and the various fees)
Many credit card issuers usually attach a battery of latent fees which might be ambiguous and difficult to ascertain in the beginning. These can range from joining fees and compulsory annual charges to fees applicable while redeeming rewards and penalty for late payment. Remember that while late payment fees are absolute and you cannot have your way with those, the others are not.
Sometimes, joining charges are waived off by certain issuers if you apply for the credit card through online aggregators. Additionally, you can also forego the annual fees if you end up spending beyond a particular amount from the card. Therefore, it is imperative to read between the lines of a credit card agreement and be downright certain of the terms and conditions of it.
- Consider a card with a higher credit limit
Credit limit pegs the maximum amount you are allowed to spend through your credit card while not attracting any penalty against breaching that limit. Therefore, it is basic to consider a card with a minimum limit that is 2-4 times than what you would tentatively spend each month. A generous credit limit will come in very handy while tackling unanticipated expenditure such as a medical emergency.
- Understand and compare the points system
The reward points that you get in lieu of expenditure made through your credit card vary among the issuer as well as the card. A few credit cards, typically from the travel and premium segment, offer a ‘joining bonus’ and other benefits, especially if your application was received through an online credit aggregator. Comparing these bonuses and benefits before zeroing in on one is the key to getting the right credit card that will service your financial requirements.
- Factor in ease of payment
A credit card – by ways ranging from net banking to mobile banking — should make it rather easy to pay off the credit once the statement is generated at the end of the month. For example, if you are thinking of paying the outstanding through cheques, check the availability of an ATM near your workplace or home.
- Don’t overlook your credit score
A good credit score – usually 750 and higher — is likely to impact chances of getting your credit card application approved. Credit score or credit worthiness, in turn, depends on factors, significant among which include your payment history and monthly income.
A credit card from a reliable lender, on most days, will revamp your financial standing and further liquidity.
