How to choose a credit card? Tips & Tricks

The market is flooded with a wide variety of credit cards and each offers different types of rewards and benefits. There are also different categories of credit cards such as cashback, rewards, travel and lifestyle, etc. The biggest dilemma that you as a prospective card applicant will have is how to choose a credit card that is right for you

Well, the answer is that you have to choose a card based on what your primary spending needs are. 

Before you apply for a credit card there are some questions that you first need to ask yourself. Here is the list: 

What type of credit card should I apply for? 

  • The type of credit card that you choose depends on two factors – first being your income and second being your lifestyle needs 
  • Many credit cards have a minimum annual income criterion and if you do not meet that you may not be eligible for the card 
  • If you are applying for a credit card for the first time, go for a basic cashback or rewards card that will let you spend and earn rewards across all categories such as groceries, fuel, entertainment and shopping 
  • If you already have a basic credit card and are looking for a card to suit specific needs like travel or fuel, consider a fuel rewards credit card or a travel rewards credit card 

Given below is a list of the basic factors that should be kept in mind before choosing a credit card: 

  • Spending and lifestyle needs 
  • Interest rates 
  • Limit on credit 
  • Fees and charges 
  • Perks 

The first and foremost thing to consider is what you would be using your credit card for. Will you be paying utility bills or dining out? Are you a movie buff or do you love travelling?  

  • If you are going to use it to pay only utility bills such as phone, electricity, internet, etc., then you will not have to consider the interest rate. This is because you will most likely be paying your bill every month and in full. 
  • In case you will not be able to pay in full each month and are looking for a carryover of balance, you will want to apply for a credit card that offers you this benefit with the lowest interest rate possible 
  • If you going to use your credit card for all purchases, you should go for a higher credit limit with a good rewards or cashback credit card 

Credit card companies assume that when you make a purchase, you will, in most cases, not pay back in full and hence charge you an interest rate for making the payment later. This is how credit card companies make money of you and this is why it is extremely important to look for a credit card that: 

Comes with a reasonable interest fee 

Zero-percent or 12-month interest free period to make payments 

Does not charge a very high fee 

Do I have a good credit score?  

Your credit score will either make or break your credit card application. It will also determine the amount of credit limit that you will be able to avail or if at all you will be eligible for a credit card at all.  

What is the joining fee and the annual fee? 

An annual fee is a certain amount you pay the credit card company every year in order to use the card and the services it offers. Some credit card companies have a no or zero annual fee policy while others will waive off the charge if you spend a certain amount every year. This varies from bank to bank, so consider this factor before you make a decision on what card you want to apply for. 

Am I eligible for the credit card? 

Another important thing to keep in mind is if you are actually eligible for a certain card that you want to apply for. There are many factors that determine eligibility and they are as follows: 

  • Credit score 
  • Age 
  • Income (per annum) 
  • Existing financial obligations 

Can your credit card application be refused? 

Sometimes, your credit card application can be refused. If you have a low credit score or if you do not fall in a certain income bracket, this may happen. However, there is nothing to worry. The best thing to do is to prepare well and do your research before you even apply for a credit card.  

  • The first thing to do is to check your credit score and see if you have a good one 
  • If you have a bad credit score, work on the same and see how you can improve it 
  • You will be able to improve your credit score by paying bills on time, not defaulting payments, etc., 
  • Sometimes, some people can also get rejected because they do have a credit score in the first place 
  • For those who do not yet have a credit score, they can avail a secured credit card against their fixed deposits or savings bank account deposits 
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