In our day-to-day life, we tend to use numerous payment modes and methods, such as net banking, UPI, debit cards, cash etc. But one payment mode which, despite the plethora of benefits that it offers, is often on the receiving end of negative reviews, is a credit card.?
Instead of understanding that it's entirely your usage and repayment behaviour that anchors the role of credit cards in your life, we end up believing the biased opinions or hearsays which demonize these otherwise super beneficial payment and credit access modes.
And more often than not, it's the failure to choose the right credit card which becomes the reason behind not being able to maximize their benefits.
So how can one choose the right credit card amongst the wide array of credit card issuers and types of credit cards offered by them? Eager to know??
Read on as we explain the key focus points to note when choosing a credit card for yourself.
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First and foremost, take a look at your spending habits when contemplating the thought of selecting a credit card. The analysis of your spending habits includes the frequency of purchases or payments and the category in which you tend to transact more. Knowing this would help you better understand your lifestyle and accordingly match it with the right credit card.?
Wondering why this is important? This is because most credit cards tend to target specific types of transactions and user groups by offering higher reward points and other benefits on those transactions.?
For example, if you travel a lot, take a travel credit card, as they offer higher benefits like complimentary lounge access, hotel vouchers, air miles etc on travel-related expenses such as hotel and airline bookings. Or if you tend to make frequent online purchases, bill payment etc., you can opt for a cashback or online reward specific credit card.?
Hence, this way, you would take the first step by knowing the category of credit card that compliments your spending habits and provides maximum benefits as per your lifestyle.
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The next step is to compare the joining bonuses and welcome benefits of credit cards falling into your chosen category. Nowadays, almost all credit card issuers offer this additional incentive in the form of joining bonuses and welcome benefits on their credit cards, which acts as an impetus to choose that card instead of the one offering nil or lower joining benefits.?
These welcome benefits can be in the form of additional reward points on joining, vouchers or coupons, etc.?
While some of such benefits may be provided upon activating the card, some might be associated with certain conditions, such as only upon a particular amount of spending in the initial days or making the card fee payment within a specific period.
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You might be wondering why compare credit cards¡¯ finance charges before zeroing on any card?
Yes we would know that finance charges are levied on the outstanding dues only when you fail to repay the credit card bill timely and in full, and these charges may not seem to matter for someone who is a disciplined user, but still it's better to not turn a blind eye towards these charges.
This is because, not only are these charges hefty in nature, hovering around the 40% p.a. mark for most cards, but also because life is uncertain. Even if you have always displayed disciplined behaviour towards credit cards and intend to do the same in future, life¡¯s financial exigencies may someday put you in adverse circumstances wherein you may find it difficult to repay the dues timely and in full.?
Keeping this in mind, you should factor in the finance charges levied by various credit card issuers before zeroing in on any credit card. If a card involves similar features and benefits but lower finance charges, it can turn out to be a better move to opt for that card instead of the one levying higher finance charges.
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Most credit cards involve a joining and/or annual fees, which differ card to card and issuer to issuer. Usually, the premium cards that offer higher and wider range of benefits tend to involve higher annual and/or joining fees as well. But nevertheless, irrespective of the category and credit card you intend to choose, it's necessary to compare such charges before finalizing any card.
However, many credit card issuers tend to waive or reverse the annual/joining fee when the credit card user spends beyond the threshold limit in a particular period, which usually is the previous year of card membership. So don't forget to check this aspect as well when comparing various cards¡¯ fees.
Besides this, there are various other fees and charges that credit cards involve, based on the type of transaction. For example, spending beyond your credit limit will attract over-limit charges, withdrawing cash from credit card will attract cash advance fee as well as finance charges, failing to pay even the minimum due by the bill date can attract both late payment fee and finance charges on unpaid amount etc.
The entire purpose of comparing these charges is to ensure that the cost-saving through cashback, discounts, reward points etc, outweigh the mandatory fees and other levied charges. After all, there is no point in opting for a card that barely offers any saving in transaction cost and on top of that involves a high annual/joining fee and other charges.
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Reward points are one of the prime?benefits?that credit card issuers highlight when pitching their credit cards to target consumers. After all, the reward points you get to accumulate on your spending and the redemption benefits you get for those accumulated reward points are the two aspects that anchor the reward point programme of credit card issuers.?
That's why it's important to compare these two aspects of various credit cards before zeroing in on any. The reward redemption programs vary across cards and issuers but usually involve benefits like conversion of reward points into gift vouchers, air miles, purchase of specific products or availing of services at select merchant outlets and/or online partners,?or even adjustment of points against outstanding credit card bill.
Moreover, most cards¡¯ reward points expire in 2-3 years, whereas few card issuers offer credit cards whose reward points do not expire. So it would be prudent to compare this aspect as well when selecting the right credit card for yourself so that you do not end up missing out on redemption benefits.
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