Aspects to check before availing of a credit card

Introduction

Today, most people cannot imagine life without a credit card. The financial tool offers ease of use and repayment. Moreover, it is a great way to build a credit profile. Your credit profile is a crucial parameter taken into consideration for determining your eligibility and pricing for lending products such as home loans, personal loans, etc.

Most credit cards offer basic features that are clear to the customer. But, if you want to make full use of a credit card, you should choose one that meets your spending habits and lifestyle. Doing so will let you enjoy the benefits of attractive cashback, reward points, and discounts.

Here are a few aspects that you must check out

1. Interest rate

If you are a first-time credit cardholder, you may have to pay a higher interest rate. This is not a worry if you can pay your credit card dues in full every month. However, there may be months when you are unable to do so. Make sure you carry a minimum balance and find the lowest rate available. Some credit cards are interest-free for the first 6 months or offer 0% interest for balance transfer within a specified time. Check for all these introductory offers before you start the credit card apply online process.

2. Annual fee

The annual fee on credit cards varies from one bank to another. As there are many options available, it is best to pick one with no annual fee. You must read the terms and conditions carefully because a few credit cards begin to charge an annual fee from the second year.

In case you are interested in rewards, then a credit card with an annual fee is a good idea. However, make sure the value of the rewards is more than the fee.

3. Credit and cash limits

A credit card issuer lets you withdraw a maximum amount against the card without any penalty. This limit is known as the credit limit. If you exceed this limit, you need to pay an over-limit fee on the exceeding amount. As a credit cardholder, you are informed of this limit at the time of card delivery. It is also mentioned in the monthly statements.

Each credit card also has a cash limit. This limit refers to the maximum amount of cash you can withdraw from an ATM using a credit card. Your credit score, repayment history, personal income, and other parameters determine the limits.

Additional Read: 10 Ways to Improve Your CIBIL Score

4. Rewards

Rewards are a big reason why youngsters apply for a credit card online. You must choose a credit card that offers reward points in sectors of your interest. These sectors include shopping, hotel bookings, electronics, flights, gift cards, or cashback. Moreover, inquire about the expiry of reward points. Having an understanding of the redemption process is also vital.

5. Joining bonuses

Many credit cards provide joining benefits and welcome bonuses. These are in the form of bonus reward points and vouchers. Some credit card issuers also offer additional benefits if you apply credit card online. Therefore, make sure you evaluate the joining benefits and bonuses while comparing the different credit cards available in the market.

Additional Read: BENEFITS OF TAKING A JOINT HOME LOAN

Conclusion

While many aspects influence your decision of choosing a credit card, your spending habits also play a crucial role. You must choose a credit card that offers maximum benefits on your top spending. So, if you travel frequently, you must use an air miles card for your flight and hotel bookings instead of other credit card types. Financial institutions target specific types of customer segments with the rewards and benefits on their credit cards.

Additional Read: How to Get Out of a Debt Trap

Disclaimer – ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.