Recent data shows that between May 2019 and April 2020,
the number of total credit cards in circulation rose to approximately 9.4
million. The increasing popularity of using credit cards can be traced back to
the easy usage and multitudinous offers that they entail.
Nevertheless, to apply for a credit card seamlessly and to maximize their benefits from available credit card features, individuals need to consider several factors before deciding. More importantly, if you are new to this financial tool, you need to typically care for your first credit card as there are numerous financial institutions ready to offer these cards at varying terms.
6 Factors to keep in
mind before choosing your first credit card
- Find the right credit card type
Before going into detail about the process to apply for a
credit card, consider the type of credit card you need for yourself. Credit
cards come in a wide variety of customized for various spending needs.
Financial institutions offer cards for requirements such
as shopping, travel, fuel, savings, entertainment, etc. Therefore, you should
choose the right credit card for yourself with a low annual fee depending on
your spending habits and funding requirement.
- Consider your income
While sanctioning a credit card, financial institutions
look for a steady income and documented proof to evaluate your repayment
capacity. The rise in income is directly linked to the rise in credit limit.
You can thus consider your total income before choosing your first credit card
and apply accordingly.
- Begin with a low credit limit
Most NBFCs offer low credit limits to individuals availing
of credit cards for the first time. While it reduces the risk of default, it
also helps individuals to manage their credit card usage from the very
beginning.
It is thus ideal to go for a credit limit that fits
suitably within your repayment capacity without putting any strain on your
finances.
- Learn how credit cards can affect your credit score
While looking to apply for a credit card for the first
time, you should also learn about how credit cards can affect your credit score
and your overall profile. Excessive use of the credit limit not only strains
your repayment capacity but also leaves an impression of increased dependency
on credit, which in turn, can affect your credit score. It is thus ideal to
know beforehand the impact of credit usage from cards.
- Get an idea about various fees and charges
Before applying for a credit card, it is also advisable to
gain a fair idea about all the fees and charges applicable to your credit card.
There can be a number of charges, including joining fees, annual fees, transfer
fees, over-limit fees, finance charges, and others that financial institutions
levy on credit cards. It is better to get a clear understanding of these fees
and charges beforehand so that you are aware of all the charges that you end up
paying.
While looking for your first credit card, it is also ideal
to opt for a financial institution that offers a low rate of interest and
minimal additional charges and fees. For instance, the Bajaj Finserv RBL Bank
SuperCard is one such financial tool with enhanced features at minimal charges.
The issuer of this card also brings pre-approved offers
for existing customers on various financial products, including personal loans,
business loans, etc. to make financing
quick and hassle-free. An existing customer can check his/her pre-approved
offer only by providing essential contact details.
- Understand the concept of the grace period
A grace period is a duration between the billing cycle’s
end and the payment due date within which financial institutions accept payments
without penalty. Generally, the grace period varies between 15-20 days.
In case you fail to pay your credit bill within the grace
period, the card issuer charges you with interest and a penalty on your unpaid
amount.
Alongside, beginners must also take care of the interest
rate charged by the card issuer and make timely bill payments to avoid
unnecessary interest accrual.
Choosing the right credit card can be a challenging decision for first-timers. Therefore, before venturing out to check how to apply for a credit card, consider the pointers mentioned above to arrive at the best credit card that suits your requirement while remaining affordable.