Home Banking How should your first credit card be chosen?

How should your first credit card be chosen?

Banks offer hundreds of different credit card types. Some have annual fees, while others have no fees at all. Examine your spending patterns and preferences to identify the best card for you to start with.

Although cash may still rule, there is no doubt that digital transactions have increased significantly. And even though everyone speaks about how popular mobile wallets are becoming, credit cards are still a common way to pay.

As of July 2022, there were around 8.03 crore credit cards in use in India, according to figures from the Reserve Bank of India (RBI). From the end of July 2021, this number has climbed by 26.5 percent.

With a credit card, you may take advantage of excellent savings, cash back, and other promotions. Credit cards are excellent for hassle-free online and offline transactions and offer an interest-free period of up to 45 days, so they can be used in emergency situations as well. Furthermore, spending sensibly and paying your debt in full before the due date will help you raise your credit score.

But it can be challenging to select the best card because there are so many available that serve different needs. Here is a summary of some of the most important considerations when choosing a credit card.

Nobody can discover the “perfect credit card” that satisfies their requirements. Your individual spending habits and interest in incentives will determine the best method for choosing the correct card. It is advised that you step back and consider why you chose a particular card; this will aid you in reaching a decision.

Expert in digital lending Parijat Garg advises choosing many cards from various brands for various needs rather than individualized ones because it’s crucial to avoid putting all your financial eggs in one basket. Remember these suggestions.

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Travel, shopping, and way of life What card do you require?

What is your preferred method of credit card use? Your purchasing patterns matter. Do you frequently travel, for instance? In that situation, a card that permits access to lounges or an airline credit card that awards miles for every rupee spent is beneficial.

A credit card with frequent cashback benefits is beneficial if you frequently use your credit card for shopping, such as for grocery purchases. There are cards that might help you receive amazing meal deals if you frequently eat out.

According to Sachin Vasudev, director and head of cards at Paisabazaar, “If your principal costs revolve around shopping, you should choose cards that offer cash back, reward rates, or advantages on expenditures with selected brands or merchants.”

“If your primary expenses are related to shopping, you should choose cards that offer cash back, reward rates, or advantages on purchases with specific brands or merchants,” advises Sachin Vasudev, director, and head of cards.

Which bank ought you choose?

Cards from most commercial banks are available. Try looking for the correct card with your own bank, that is, the bank with which you have your savings account and your main relationship, to make it simpler. Your own bank is probably going to make you a preapproved offer based on your financial situation. These deals reduce paperwork and processing time. According to Adhil Shetty, CEO of BankBazaar.com, “you may normally apply for these offers via your bank’s online or app, or look them up on a platform.

A reputable bank with numerous cards is often one of your top options, according to experts. It is not wise to select a bank that only provides one or two cards at this time. The banks are either experimenting with their card operations or may be closing the cabinets, according to Garg.

Annual fees or free cards for life?

The amount of credit card goods available on the market is not publicly known. Rough calculations indicate that a bank typically offers 20 different products. This amounts to between 200 to 400 credit cards available on the market. However, there are no estimates as to how many of them are perpetually free and how many require annual fees.

A lifetime-free card appears superior on the surface. But it isn’t always the case.

Premium high-end cards with yearly fees may provide greater advantages than cards that are free for life. As an illustration, the HDFC Diners Club Black credit card provides annual membership to Club Marriott, Forbes, Amazon Prime, Zomato Pro, Times Prime, etc. Additionally, the cardholder enjoys unrestricted access to airport lounges both domestically and internationally. Similar to this, a State Bank of India Aurum credit card offers complimentary subscriptions to services like Amazon Prime, Zomato Pro, Lenskart Gold, Discover Plus, etc. The cards also have unrestricted access to the international airport lounge here.

The good news is that if you spend a minimum amount each year, several premium annual fee cards will waive your costs. For some cards to waive the yearly charge, you must add a link to a utility bill payment to your card.

In spite of this, beginners should stick to credit cards without yearly fees.

That’s because the majority of premium credit cards have stricter eligibility standards. In other words, you must fall within a certain salary range or your application may be turned down. Additionally, this hurts your credit profile.

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Be aware of the costs

The fees associated with possessing a card, in addition to the rewards and advantages, are the most important factor when comparing the cards across all categories with those of their rivals. You must properly balance the costs and benefits due to issuance fees, interest rate fees, and yearly renewal fees.

Issuance fees for starter cards for new users are often nonexistent. But we’re noticing a predilection for premium cards, which are normally priced at Rs 499 or more. Customers favor them because of their superior advantages. Most credit cards have annual percentage rates that are above 40%. According to Shetty, fees on premium credit cards might reach thousands of rupees in some circumstances.

Recognize your rewards

Customers who choose credit cards typically begin here. But in a perfect world, this would be the bottom of the pyramid.

If a welcome offer doesn’t fit with your spending choices, such as a welcome gift of one or two free airline tickets or a complimentary hotel night, don’t choose that credit card. Similar to that, vouchers that you receive in exchange for spending a minimum threshold amount—typically between Rs 2 and 5 lakh per year—shouldn’t lure you to spend more than you can comfortably afford.

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