With India focusing on developing a cashless economy, a credit card has become one of the most valuable personal financial tools. Life without a credit card is almost unimaginable today. A credit card offers payment flexibility and also helps you build your credit profile, which is an essential parameter that lenders look at while assessing your eligibility for a personal loan, business loan, home loan, education loan and other financial products.
While applying for a credit card is simple and straightforward, the choice available is huge which makes it complicated for people to select the right card for themselves. There are hundreds of credit cards available in the market to lure customers. But before you apply for a new credit card or upgrade to another card, it is essential to identify if the card will meet your needs and objectives.
Here are a few factors to consider while selecting your credit card
Analyse your spending habits
Credit cards are designed to cater to specific types of customer segments. Every credit card offers a particular kind of benefit. Therefore, the kind of credit card you should own depends on your spending habits and needs.
Before you choose a credit card, ask yourself, “how do I intend to use this card?” The answer to this question will be a significant consideration factor for choosing a suitable credit card. For example, if you are going to use it to shop, you need to look for a card that offers an enhanced credit card limit with an excellent reward program. Likewise, if you intend to use the credit card only during financial emergencies, you can go for a no-frills credit card offering a lower interest rate. Similarly, if you travel a lot and spend a considerable amount on refueling every month, you can opt for a card that offers excellent benefits and rewards on fuel transactions.
Cost of keeping the card
While choosing a credit card, you may want to consider the cost of obtaining and maintaining it. You have to pay various charges such as joining fee, annual fee, transaction fee, overseas transaction fee, ATM withdrawal fee and other finance charges. Therefore, read the fine print carefully before selecting a credit card to do a cost-benefit analysis. Also, you may want to look at the cost of borrowing on the card, (interest accrued), if you don’t pay off the entire credit card balance each month by the due date. Apart from the fees and charges, you may also compare the Annual Percentage Rate (APR) offered by different cards to select the cheapest card.
Look for a card that offers the best rewards and benefits as compared to the cost of obtaining and maintaining it.
Look at the interest rate
Many times, credit card issuers try to attract customers with introductory offers like zero per cent interest rate or lower interest rates. Once the introductory period lapses, you could be charged an interest rate much higher than the initial offer. It is crucial to know the regular interest rate beforehand to make a wise choice.
To qualify for a lower interest rate, work on your credit score and ideally maintain a higher score above 750.
Look at the credit and cash limit
A credit limit is the maximum amount of money the credit card issuer allows you to draw against your card, without incurring any penalty. Likewise, cash limit is the maximum amount you can withdraw from an ATM using your credit card. These limits vary from lender to lender and also depends on your credit history, credit score, income and other factors.
Choose a credit card that offers enough credit and cash limit. This is because you may not want to be in a situation where you have to max out your limits and in turn hamper your credit score. Moreover, a higher credit limit can address financial emergencies and help you avail a higher loan amount against your credit card.
Consider rewards and incentives
Many credit card issuers provide reward and incentive program to induce you to use the card. You can earn reward points from your everyday purchases and payments which could be used towards travel, cashback, retail purchases, etc.
However, it is a good idea to read about different reward program that come with various credit cards. You can look for a plan that offers excellent flexibility where reward points can be quickly earned and redeemed.
While considering incentives, you may also want to pay attention to the various restrictions that come with some programmes, such as expiry of reward points if not used by the due date, maximum limit of earning reward points, the maximum cap on using the reward points at a time, etc.
By following these easy tips, you are sure to find a credit card to suit your unique requirements based on your lifestyle and spending habits.
While shortlisting your options, consider the Bajaj Finserv RBL Bank SuperCard, which is one of the best credit card in India. It offers numerous benefits like interest-free cash withdrawal from ATMs, emergency loan, robust security, welcome rewards, affordable charges, instance approval process and exciting reward points.
The entire process of availing a credit card is very simple and easy. With minimum documentation and quick approval, you can get a credit card within no time. Moreover, to further ease the process of obtaining a credit card, Bajaj Finserv provides various pre-approved offers that help you save your time and energy. There are pre-approved offers on credit cards, personal loans, home loan, business loans and a host of other financial products. You can check out your pre-approved offer by sharing a few basic details like mobile number and email id.