For many young folks in India, getting a credit card is like unlocking financial freedom and independence. But diving into the credit card scene can be overwhelming for newbies. You must cover annual fees, cash withdrawal charges, credit card interest rates, and payment due dates.
The key is carefully planning and researching to catch the perfect card that fits your needs and helps you stay on top of your money game. This article provides handy tips for getting your first credit card in India.
Step 1: Understand How Credit Cards Work
Before getting a credit card, you must understand how it works.
The issuing bank pays the transaction amount on your behalf initially. Later, you must repay the bank within the grace period to avoid interest charges. If you settle only the minimum amount due, interest accrues on the outstanding amount.
Step 2: Check Your Eligibility
Banks require applicants to be 21 to 65 years of age and have a regular income source. Salaried employees and self-employed professionals can apply subject to meeting minimum income thresholds. Finally, a credit score above 750 is desirable to indicate your prudent past borrowing and repayment behavior.
Step 3: Choose Between Different Types
With hundreds of credit cards flooding the market, finding one well-suited to your lifestyle can get confusing. Broadly, cards fall under five categories—classic, premium, travel, shopping, and secured cards.
Step 4: Compare Credit Card Charges
Apart from rewards and features, you must compare the fees applicable across different credit cards to calculate long-term costs:
- Joining and Annual Fees: A few entry-level cards don’t impose membership or renewal fees, while premium cards charge exorbitantly under these heads up to Rs 10,000 annually.
- Interest Charges: The monthly interest on revolving credit varies from 1.25% to 3.5% across cards. A few cards charge nearly 40% per annum. Opting to pay only the minimum due results in an accumulated interest burden over time.
- Cash Advance Charges: Credit cards permit cash withdrawals from ATMs up to a specific limit at a transaction fee of 2.5% – 3.5%, subject to minimum amounts of Rs 250 – Rs 500. This absurd charge, clubbed with interest dues on the withdrawal, makes this route highly expensive for meeting cash needs.
Step 5: Assess Other Parameters
Credit cards entail several other parameters beyond fees, which require evaluation before finalizing your choice. These include:
- Credit Limit: Opt for a card with an adequate maximum usage limit to accommodate monthly expenses conveniently. However, avoid cards offering unrealistically high limits, as overspending could prove detrimental.
- Reward Redemption: Analyze the value you derive from loyalty points and redemption processes for items you desire to obtain true worth from your spending.
- Billing Cycle: Understand grace period, due date calculations, and interest charge dates properly to avoid penalties through timely payments. Set payment reminders accordingly.
- Network Acceptance: Ensure merchant outlets frequented by you accept the credit card before applying to prevent hassles in payments later.
- Mobile App, Web Interface: Prefer cards offering intuitive apps and interfaces for tracking spending, making payments, and blocking cards promptly during loss or fraudulent transactions.
Step 6: Apply and Get Started!
Once zeroed in on a suitable card basis above guidance, visit the issuer bank’s website to apply online or through mobile apps. Supporting documents like identity proof, address proof, and income statements may require submission alongside the prescribed application form.
The Bottom Line
Acquiring your first credit card marks a significant step towards financial independence. Use it smartly per the guidance shared above to unlock its benefits responsibly without debt traps. Gradually, you can expect an enhanced lifestyle, superior access to credit, and a proud sense of freedom and empowerment as your financial prudence gets acknowledged through higher credit limits and pre-approved loan offers.
