5 Important Things to Keep in Mind While Choosing a Credit Card

© Provided by BankBazaar.com
Photo:www.pixabay.com

Credit cards have become much more than just another payment tool as they enable cashless transactions that can actually incentivise our expenses with benefits like cashback and reward points. However, the key to maximising the value of your card spends actually lies in smartly selecting a card that’s aligned with your unique spending pattern. More importantly, your credit card should help you save more within your budget. So, if you’re looking to get a new credit card, here are a few important things to keep in mind.

Eligibility Requirements

You might not be eligible for all the credit cards available in the market. As such, ensure you shortlist only those cards which you’re eligible for, meaning you should meet all their criterion like minimum income requirement. Applying for a card you’re not eligible for will lead to rejection of your application and would invite an unnecessary ‘hard’ inquiry on your credit history which might lead to a drop in your credit score.

Annual Fee

Many premium credit cards that offer enhanced benefits also carry an annual fee that must be paid to keep your card account active. Now, you may choose a zero annual fee card variant but those might have limited benefits. So, before ruling out a card because of its annual fee, check if you’re getting anything extra meaningful in return while staying in your budget, like bonus reward points, joining gifts or free air miles.

Type Of Card Benefits On Offer

Credit cards come with a wide range of benefits and privileges. However, you should get one that best matches your usual credit card spending patterns. For example, if you plan to use your card mainly for online spends, you should go for an option that gives extra cashback or accelerated reward points on online spends. Or if you’re a frequent traveller, a travel credit card that helps you earn air miles and gives you complimentary travel insurance and free lounge accesses should make more sense to you.

Budget For Card Spends

Once you’ve shortlisted a few credit cards based on their benefits, the next thing to factor in should be how much of those benefits can you enjoy without breaching your monthly budget for card expenses. For example, let’s say a credit card offers 10x reward points on online shopping on a monthly bill of above Rs. 30,000. But if your monthly budget for card spends is Rs. 10,000, you’ll not enjoy the benefits and might be better off with a different card. As such, ensure you never breach your budget in order to maximise the card rewards as any laxity in paying your bills in full within the interest-free period would attract interest charges and late payment penalties.

Reward Riders

Once you’ve shortlisted a few options based on your preferred benefits and budget, you should then read the fine-print to understand the reward riders, if any, like reward points and cashback cap, partnering merchants, reward points validity and redemption rate, etc. For example, let’s say your chosen credit card gives 5% cashback on grocery expenses capped at Rs. 100 per month. If your monthly budget for groceries is Rs. 10,000, you should ideally be able to save Rs. 500 in a month through your card but due to the capping on cashback, you’ll only be able to save Rs. 100. Or let’s say your chosen card gives 10x reward points on online spends but only on particular websites. Now, if you don’t happen to shop on any of those partnering e-commerce sites, you’ll lose out on the benefits despite being a frequent online shopper. As such, ensure you have complete clarity on such things before finalising a credit card.

In conclusion, putting in some effort in choosing a credit card will go a long way in helping you save more on your day-to-day expenses while making your life more enjoyable with additional perks like special discounts at restaurants and e-commerce sites. However, it will be worthwhile to re-emphasize that you must be able to clear your outstanding dues in full on time every month to avoid additional charges and an impacted credit score.

The author is CEO, BankBazaar.com.

Check out some amazing credit cards and get 100% paperless approval from the comfort of your home. BankBazaar.com is India’s leading online marketplace for credit cards, loans and more.