Whether it is withdrawing cash or making transactions, Indians always prefer debit cards. However, debit cards are not that beneficial when it comes to purchasing. You won’t get any offers or reward points when you use this card for shopping.
In such situations, a credit card reigns supreme. They provide reward points with every transaction that can be redeemed for making purchases affordable. Furthermore, several card companies offer unique features based on the spending habits of individuals.
If you already have one or are going to opt for it, then you should know about the following things first:
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1 – Joining and annual fees
You need to know the annual fees when you apply for a credit card. The joining fee is the same amount that you have to pay annually. Some companies may not charge the joining fee but will have the annual one.
Taxes are also incorporated over the annual fees.
2 – Grace period
Credit cards come with a grace period or the time within which you don’t have to pay any interest on the bill. Generally, credit cards in India come with a grace period of up to 45 days.
You will be charged a high rate of interest and other penalty charges for not clearing your dues within this period.
3 – Reward points
Reward points are one of the primary reasons why individuals apply for a credit card. These points can be redeemed for vouchers, cashbacks, and coupons. You can use vouchers and coupons to get discounts on purchases and cashbacks to decrease your outstanding dues.
Always check the number of reward points you can earn with every transaction. For example, the Bajaj Finserv RBL Bank SuperCard offers more reward points for online transactions as compared to offline ones. This card combines the power of 4 credit cards in one to bring several industry-first features. You can get an interest-free emergency loan for a period of 90 days and ATM cash withdrawal for up 50 days when you avail this SuperCard.
4 – Rate of interest and other charges
Learn the rate of interest and other charges that you may have to pay in the case of late payment. In any condition, you must avoid defaulting payments.
Credit cards can be used for international purchases; however, they can attract additional charges. Hence, you have to check those as well, if you plan on spending abroad.
Note: Always pay your card bills in time, as late payment will lower your credit score and creditworthiness.
5 – Credit limit
The credit limit is the total amount that you can spend with your card. The credit limit may depend upon your income and CIBIL score. These two may also play significant roles in your credit card eligibility.
Note: Refrain from utilising your full credit limit as it will decrease your credit score. Always keep the credit utilization within 30% of your sanctioned limit.
6 – Creating a budget
One of the ideal ways in which credit cards help manage your finances is by creating a budget. You may not be able to keep track of your expenses manually, but credit cards can help you do so. The bill contains all the purchases you have made.
Analyzing the bill helps you make a budget for the next month and eliminates things that unnecessarily eat up your income.
7 – Converting monthly bills into EMIs
One of the superior benefits of credit cards is that you can purchase products on EMIs. But, you may not know that it is also possible to convert the outstanding due amounts into easy EMIs.
A credit card offers a grace period of up to 45 days to clear the dues. If you fail to make the payment, you have to pay a high rate of interest, late payment charges, etc.
However, in case you can’t clear the bill in time but also want to avoid the high interest, then you can convert that outstanding amount into EMIs.
Therefore, whenever there’s a probability of high expenditure around, you can use your credit cards and make the repayments flexible.
8 – Minimum repayment
The minimum repayment is the amount that you can pay in case you don’t have adequate funds to repay the total amount due. Keep in mind that the total outstanding amount will be added to your next month’s bill even after making the minimum repayment.
Note: Paying the minimum amount instead of the full amount will also bring down your CIBIL score.
9 – Special rewards
Last but not the least; you need to check for special rewards that you can get from the credit cards. For example, some offer air miles when you purchase flight tickets while others provide fuel surcharge waiver per month.
While air miles can make your travels affordable, fuel surcharge waiver can help you save significant cash. You can also get complimentary airport lounge access, free upgrade to business class, concierge service, etc. with some credit cards. So, choose the card that suits your requirements the best.
These were the 9 things that you need to know when you apply for a credit card. Remember, to always use your card responsibly so that you can avoid a high rate of interest and improve your CIBIL score.
Gaurav khanna is an experienced financial advisor and writer who is well known for his ability to market trends as well as for his financial knowledge. You can find Gaurav on Linkedin.