A credit card is of the most prominent, albeit misunderstood financial instruments across different consumer sections. Interestingly, if you choose a credit card for the first time, things can look complicated and directly impact your creditworthiness. Below are some pointers on how to select a credit card to suit your lifestyle and enjoy maximum benefits:
Being clear about the objective
There are many misconceptions about how a credit card can be used. However, you can overcome such uncertainties by clarifying what you intend to do with the card. If you have an affinity for shopping, you can choose an excellent card for shoppers and provides better cashback benefits.
If you are a traveller, you can select a card with better ticket booking and other travel amenities. Similarly, there are cards for durables, dining, etc. as well.
Maintaining multiple cards
Having more than one card is entirely acceptable contrary to some financial experts’ advice around the world. However, such an action should not get in the way of financial discipline.
Suppose you feel that a particular card offers slightly confusing features. You can discuss with the bank/NBFC offering the credit card and getting educated about it before choosing the same.
Credit cards are great if you are a smart shopper, i.e. you do not spend vast amounts of savings on a depreciating asset. For example, you wish to buy a smartphone worth Rs. 1,00,000 and you have decided to exhaust your savings which might help you during a financial emergency.
Instead, you can use a credit card as most banks/ NBFCs partner with e-commerce/ offline stores to provide zero-interest EMI on your purchases. Financial institutions also offer lucrative cashback on every purchase you make to promote spending patterns.
Additionally, you can also use the card during emergencies when there are no other sources to provide you with funds. Top financial institutions offer cards which can also convert large credit amounts into smaller EMIs to facilitate repayment. With such features, your credit card can be your worthy saviour during difficult times.
There are multiple advantages with credit cards in India; such a financial instrument can be challenging to manage if you frequently miss the due dates. Banks/ NBFCs charge a considerable amount of interest if you use a credit card but forget to make timely repayments.
On the other hand, you do not have to worry about interest rates if you have a strong repayment strategy. While making minimum due payments would not burden you with high interest, such an action can negatively affect the credit score. Hence, it is best to make the monthly payments in full, compared to the minimum due amount.
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While there are annual maintenance charges for credit card usage, most banks/ NBFC waive the charges for the customers’ benefit. If customers make a designated purchase within a year, such cards qualify for zero maintenance fee. However, there are cards which come with a nil annual maintenance fee as well.
Additionally, there are renewal charges every year and hence make sure you check such costs on the lender’s website before you sign up for the online credit card application.
There are other changes too, such as late payment fee, GST charges, foreign currency markup charges, cash withdrawal charges, etc. Cash withdrawal from ATMs on credit cards is not advisable as the interest rate is very high for such transactions.
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Credit cards in India can be convenient for managing monthly expenses. But you should have a clear objective about usage, ensure timely repayments and stay aware of various charges levied on credit card transactions.