Want to apply for a credit card? Here is a checklist to choose the right one
Credit cards play a consequential role in making your life easy. From purchasing groceries to booking tickets, credit cards are one stop mode of making payment as it caters security and convenience. If you are looking out to apply for a credit card, then it is important for you to consider the following checklist:
Every credit card comes with a set of distinctive benefits; hence you must select a card garnering you with the best of its value. For example, a travel credit card offers discounts on travel, dining and hotel stay; a fuel credit card comes with extra rewards and cash back on fuel purchases; and rewards credit card allows you to earn miles, points, cash back depending on how much you spend each month; a co-branded credit card offers you cash back, vouchers and rewards specific to the partnered brand. Therefore, you must analyse your regular transactions and spending pattern and choose a credit card that fits your lifestyle.
Associated fees and charges
Credit cards come with distinct fees and charges like – joining fees, annual fees, renewal fees, cash advance fees, card replacement fees, late payment fees, mark up charges, service tax fees, statement fees, finance charges etc.
Annual fees for every bank are different as they depend on the type of the card you have applied for. Generally, they can range between nil and Rs 60,000. Most banks waive off the annual fees on the spend of a considerable amount. An over limit fee ranging between 2.5% and 3% subject to minimal withdrawal of Rs 500 is charged on conducting a transaction beyond your credit limit. A mark-up charge of up to 3.5% of the transaction value is charged on making foreign transaction in India or abroad.
Also, note that credit cards offer you the benefit of interest-free period on the basis of your transaction date and due date. Interest-free period can go up to 55 days. The lenders expect you to pay back the credit card bill in full on or before the due date. However, on failing to pay off your credit card bill in full, you will have to incur finance charges ranging between 18% and 47.88% pa.
What attracts a consumer to a credit card over others is its reward programme. Such incentives come in the form of airline miles, cash back offers, vouchers, discounts etc. Mostly all credit cards offer rewards on daily spends. However, there are certain credit cards which are reward-oriented that garner you with higher rewards than basic credit cards. For instance, American Express Membership Rewards, Diners Club Rewardz, Citi Bank Rewards, SBI card Prime, are few reward specific cards. The reward rate for such credit cards can go as high as Re 1 per reward point.
You can accumulate the rewards to redeem the points for cash back, air tickets, monthly utility bill, fuel, vouchers etc. There are some credit cards that enable you to pay your bill by redeeming your rewards or cash backs.
Therefore, before you apply for a credit card, you must understand its reward scheme well and choose the card which would work for your present lifestyle. Also, keep a track of when your rewards will expire.
Offers and deals
Credit cards also endow you with special offers and deals on transactions, like discount on specific restaurants, cash back or rewards on Uber or Ola rides, e-vouchers on online spends, fuel surcharge waiver, access to premier golf courses worldwide, access to airport lounges across the world, dining privileges and many more. You must consider such options before selecting a credit card.
Credit cards offer perks and spending flexibility. Yet, there are risks involved as credit cards can end up costing plenty, if mishandled. Therefore, it is best if you can avoid complacency, maintain discipline and pay your bills in full and on time – you may find a little effort can go a long way for credit scores.