Credit cards have become an integral part of our lives. Providing an instant flush of liquidity, they help you overcome cash crunch. Getting a credit card for the first time is exciting and thrilling. However, there are certain things you need to watch out for when you apply for a credit card for the first time. Read on to know the various aspects of credit cards and things you should consider before getting your first one.
A credit card is an unsecured borrowing where you don’t need to pledge any security. Your credit card issuer, bank, or NBFC, offers you a pre-defined credit limit. You can borrow up to that amount from your card. However, you need to pay back the amount borrowed within a specified period. If you fail to do so, you need to pay interest.
As credit cards are an unsecured mode of finance, interest is on the higher side. You can borrow the same amount again as you keep paying your dues. When you purchase with a credit card, the amount gets deducted from your credit limit. On the other hand, the amount is added to your credit limit when you pay it back.
There are different types of credit cards available in India. Some of them are:
As the name suggests, this credit card is exclusively for women customers. It offers discounts on purchases across grocery chains and supermarkets. It also offers rewards on entertainment expenses and flight travel.
A silver credit card is an entry-level premium credit card. It is typically designed for salaried employees seeking premium rewards. If you have a decent credit score and history, you can apply for a silver credit card. It has a low annual fee, and the interest-free period ranges from a month to 50 days.
These cards are for high-income individuals. These have high credit limits and offer high rewards on purchases and access to dining restaurants and airport lounges. Gold credit card holders get cashback offers and reward points.
A titanium credit card is also a premium credit card that offers advantages similar to a gold card. You can opt for a revolving credit facility with a titanium card. It means your credit gets upgraded as you pay off your debts. Cash withdrawal limits are also high in titanium cards.
Almost all banks and financial institutions offer classic credit cards. Though the credit limit may not be very high, yet if you are a first-time credit card user, you can opt for this card. Accepted globally, these cards allow cash advances to members. They also offer a waiver on fuel surcharges and travel insurance.
These cards are available for businesses and are primarily held by business heads. However, they can also be issued to employees, with the employer having the option to cap the monthly credit limit for employees. These cards also offer rewards for entertainment, accommodation, and travel.
You need to meet certain eligibility criteria before applying for a credit card. The criteria are well-defined by card issuers on their website. Generally,
Make sure to go through the eligibility criteria and stick to them to improve the chances of getting your application getting approved.
When applying for a credit card for the first time, you must closely watch the annual fees charged. It differs from issuer to issuer. Ideally, you must apply for a card that charges a low or no annual fee. Read the terms and conditions carefully to avoid surprises later.
It is another crucial lookout. As a first-time credit card issuer, you might have to deal with a card where the interest rate is on the higher side. However, if you pay the outstanding balance on time, you don’t have to worry about the high-interest rate. A few credit cards don’t charge any interest for the first six months of issuance. You can look forward to them in the beginning.
When you are applying for the first time, the credit limit is not high. Credit limit refers to the maximum amount you can borrow from your card. If you plan to make a big purchase, you need to see your credit limit. On the other hand, if you want to build credit, a low credit limit doesn’t matter.
Credit cards offer rewards when you make a purchase. These rewards are spread across various domains. It’s prudent to opt for a card that meets your needs - flights, shopping, travel booking etc. Also, find out how you can redeem the rewards as they have an expiry date.
Ensure you know about the extra fees that the credit card issuer will levy on you. These include cash advance fees, balance transfer fees, and over the limit fees. So, make sure you are aware of what you are opting for.
As said, the credit limit on your first credit card will be on the lower side. Therefore, you must keep your credit utilisation ratio on the lower side. This ratio is the total amount of revolving credit you are using divided by the amount of credit available. A high ratio portrays you as a credit hungry borrower. Don’t use your card for every little purchase.
Though you can pay the minimum balance on your credit card, it’s advisable to pay the entire balance. If you pay only the minimum balance, the outstanding balance keeps on accumulating. It becomes challenging to pay later, and missed payment sullies your credit score. So, it’s a good habit to pay the outstanding balance in full.
You must closely monitor your credit report that gets created once you start using your credit card. You must closely monitor your credit report and report in case of any discrepancy. Get the issue resolved quickly without delay.
Prudent use of your first credit card will help you build a solid credit profile and consolidate your credit score. Be wise while shopping for it and adopt best practices to leverage its potential to the maximum.
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