Credit card is a twin edged sword. On one hand it makes life simpler by doing away with cash and providing rewards for spends, on the other, it can result in a debt trap if not used well. Deciding to apply for a credit card is a big decision in itself.
OK, so you have finally made up your mind to apply for a credit card. But the decision making is far from over. Its actually just getting started. The world of credit cards is a confusion one with over 40 choices available to the customer.
Every prominent bank out there offers multiple options. So which one do you put into your wallet? Lets make things simpler for you.
There are five things that you need to consider to narrow down on the card that is best suited to you:
Spending pattern Most cards in the market are tailor made to incentivise spends on particular categories. Some may give you rewards for spends on bill payments, while other may reward ticket booking or shopping. The first thing that you need to do it plot the approximate amount you will be spending in each of the broad categories of utility bill payments, shopping & dining, fuel, & travel. Use this spend pattern to determine which card will give you the maximum reward points/cashback.
Everyone wants to get the most value for their hard earned money. Unfortunately, paying joining/annual fee for a credit card is not considered a value for money proposition. However, that’s not correct. Paid cards, as they are often called, come with added benefits (one time rewards) which more than offsets the joining fees that you pay. The industry as a whole is also moving away from free cards. The amount that you are willing to shell out in fees can help narrow down the choices.
Reward points are not the only benefit of using a credit card. The attached benefits range from inbuilt fraud protection and insurance to lounge access, golf privileges and discounts on dining. If you are a frequent traveler, opt for a card which offers complimentary lounge access. If you love golf, go for one which allows entry to prominent golf clubs.
The limit assigned on the card is a driving factor for a lot of people. A higher limit allows you to carry just one plastic for all your spends without having to bother about exhausting it. On the other hand, it also results in higher liability should the card be misused/lost/stolen.
While you cannot influence the credit limit assigned to you by the bank, applying for a higher category of card would typically mean higher credit limit (if approved).
If you are the type of person who pays the entire credit card bill on or before the due date (I highly advise you to do this), you can ignore this factor. Interest rate is simply the amount the bank charges you for the amount that you haven’t paid by the due date. Not only that, any subsequent purchases that you make will also add to your interest burden. The interest charges on credit card dues are astronomical and this would be the most important criteria for people who plan to revolve their dues.
If you need a simpler way to do this, head over to RupeePower which allows you to filter card by spend patters, compare features of selected cards and instantly apply for the shortlisted one. Do you your card responsibly once you have one in your hand.