India Markets open in 7 hrs 24 mins

How To Pick The Right Credit Card

Adhil Shetty

With the variety of benefits credit cards offer, it is difficult to stay away from them. Credit Cards are among the most popular electronic payment option as they provide customers an option of buying now and paying later. With an array of credit cards available in the market, it may become tough to choose the best one for yourself. You should consider your spending habits, benefits of a card, and the charges associated in order to pick the right one.

We take a look at each aspect in detail to help you choose a credit card apt for you.

Spending habits

Assessing your spending habit would help you choose the right credit card. You should take into consideration your lifestyle, travel needs, shopping frequency while getting a credit card for yourself. For example, a frequent flier can consider travel card and can enjoy benefits like free lounge access, discounted air tickets, and reward points for online bookings. Credit card companies also forge partnership with various merchandise to provide special benefits to its customers through discounts and offers. Similarly, a co-branded credit card can help you get benefit for brand loyalty. So, for example, if you are a frequent flyer, you could benefit from an airline co-branded card, which are cards offered by airline companies in association with credit card companies. These cards can earn you extra miles which turn into discounts. The same benefit can be enjoyed if you are loyal to a shopping brand. If you are one of those who uses a credit card occasionally, then you can opt for a no-frills card that come with no joining fees and minimal rewards.

Credit Card Charges

You will be charged or not charged at all depending on the features of the credit card. While some cards come with no annual fee or renewal fee, others may enforce one or both these charges. And if you are lucky, some credit card companies may waive off the charges under pre-defined circumstances. A card offering higher rewards would charge higher annual rewards and may come with joining fees as well. Besides these, credit cards charges include interest on outstanding balance beyond the credit-free period and penalties. Therefore, it would be wise to weigh your cost against the reward before you zero in on a credit card. A thorough research on the credit cards offering by companies and comparing charges associated would be the best way to choose a credit card. Do remember to check all the credit card costs, penalties, interest rates etc. to avoid any unpleasant surprises. After the interest-free period is over, interest rates are typically high on credit cards. So, it would be wise to do a comparison online before zeroing in on a product with the lowest interest charges.

Check the credit limit

A credit card company decides on the credit limit based on an individual’s income potential, credit history etc. You can maintain a steady credit utilisation ratio with a higher credit limit. Credit utilisation ratio is the outstanding balance compared with the total credit limit. A high credit utilisation shows you are credit hungry, thus impacting your credit score negatively. In order to maintain a good credit utilisation ratio, your spending through credit cards should not surpass 30% of your total credit card limit. So, it would be wise to go for a higher credit limit.

Secured Vs Unsecured credit card

Credit cards are available as both secured and unsecured instruments, depending on whether you provide a collateral against the card or not. The credit limit on a secured credit card is ascertained basis the size of the underlying collateral which may be an FD. Such a card is helpful for anyone who doesn’t have a credit history and may not be eligible for an unsecured card. Once you have a credit history, you can opt for unsecured cards which don’t require a collateral. If you hold an unsecured credit card, any delay in repayment of the outstanding balance would negatively impact your credit score. However, if you do not have a credit history, a secured credit card can help you to build a substantial credit history.

The writer is CEO, BankBazaar.

BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for credit cardpersonal loanhome loancar loan, and insurance.