Are you clueless about which credit card will be suitable to you? How to choose the right credit card? Then stay tune in as this article will tell you all the things that you should keep in mind before selecting a credit card for you.
There are hundreds of credits cards available there our in the market. You just have to choose a right one for you. You need to be clear in your mind as to for what purpose you will use the credit for. You need to be sure as to you are going to use the card for easy shopping, or for availing EMI on shopping.
Here are some of the points that you must consider before you apply for a credit card.
Spending Habits helps to choose the right credit card
Any one who use the card for all general purpose may opt for general purpose credit card offering best cashback on purchases. Person who travels a lot may choose credit card which offers best miles which can be utilized for travel cost. Any one who does lots of shopping online at Amazon may apply for credit card offering best cashback on purchases made at amazon
Annual Percentage Rate (APR)
When you use the credit card for making the payment for purchases you make, you in fact borrow money. The credit card company charges you interest for this privilege in the form of interest. This interest rate is called Annual Percentage rate (APR). This is the interest rate charged by the credit card issuer on amount unpaid after the due date of payment. You must compare the interest rates of several cards before you apply for a credit card, if you anticipate that you will not be able to pay the dues in time.
Minimum repayment is the minimum amount that you will have to pay in case you cannot pay the entire dues of the month. This minimum repayment limit needs to be checked before hand if you anticipate that you will not be able to pay 100% of the dues within due date. However, you must avoid minimum repayment as this negatively affects your credit score as it gives indication that you are not prompt in t payment of dues and you are not competent to repay the debt in time.
Grace period is the time allotted to the card holder for making the payment due after the billing. Grace period starts from the end of billing cycle and ends on next payment due date. Generally, this time is 20 days from the end of billing cycle.
Annual fee is the charges billed by the card issuer for availing the credit card. These charges are added to the credit card holders account and forms part of the outstanding balance and interest is payable on this fee as well. The annual fee varies from card to card and company to company. If you don’t plant to use the credit card much, you must choose a card which doesn’t have annual charges just for holding credit card.
Charges helps to choose the right credit card
Card issuer charges for various services it offers on the credit card. It includes late payment charges, using the card in foreign country. Charge on cash withdrawals using credit card, Charges for crossing the approved spending limit, GST etc. This is one of the most important factor you have to consider before answering the question of how to choose the right credit card.
Introductory interest rates
credit card issuers sometimes provide less or zero interest rates initially to lure the prospective card holders. This concession is provided for a certain period of time after which the normal interest rates apply. Your must check out this introductory period and the interest rates. Card issuers charges different rates for different transactions.
Loyalty points or rewards
These are points which is awarded to the card holder on spending through credit card. The more you spend the more points you earn. These points are cash equivalent. Monetary value is fixed for these points for example 1000 points = $100. These reward points can also be utilized for making payment for online shopping. Usually there are made available in the form of discounts. Credit card issuers usually tie up with major brands, online shopping platforms etc. and offer discount on using their credit card for making the payment
Cash back helps to choose the right credit card
Cashback is basically a rebate or refund of the amount paid or spent through credit card. For example, if you spend say $200 for purchasing a mobile you can get a cashback of say 5% i.e. $10. This amount is deposited back to your card and reduce the amount of credit by $10. There are different rates of cashbacks on different types of transactions. So, you must compare different credit cards and the amount of cash back they offer and on which type of transactions the cash back is offered before applying for it.
The Credit score is a statistical number which determines the credit worthiness of any individual. This score is calculated by credit rating agencies from the data submitted by an individual to banks and financial institutions. It is based on employment, income declared, debt status, repayment history etc. Higher the score, better is chance of approval of credit card application. So you need to maintain a good credit score.
Using a comparison website helps to choose the right credit card
You can make use of credit card comparison website for comparing various options available in credit cards. These websites can help in choosing the right credit card for you. There are many websites available online which can help you out in selecting a best deal on credit cards. They will assist in answering your question how to choose the right credit card for you.
Signing a credit agreement
Once your credit card application is approved, you will be asked to sign the credit agreement. This agreement will mention about the credit limit, repayment period, interest rates, penalties, charges etc. Most importantly, review and understand the sentences written in small fonts as they are usually hidden terms which are not normally disclosed to card holder in advertisements and promotions.
Cash withdrawal on credit cards
Apart from swiping of credit card at merchant stores and online transaction, it can also be used for withdrawal of cash at ATMs. The limit of cash withdrawal varies from card to card. You can compare this limit of various cards before applying for the credit card. However, the interest rate applicable on cash withdrawal is usually high. You can opt for credit card offering high cash withdrawal limit if you are confident about the prompt repayment. Since the interest rate is high on cash withdrawals, this is likely to boom up your outstanding. In this situation if you are unable to pay the dues promptly, your credit score will be negatively affected.
Below are some of the major credit card companies.