7 points to help you choose the right credit card!

By BankBazaar | August 28, 2014

Pick the right credit card

Credit Card is gradually becoming a necessity. With many valuable features, this 86×54 mm card is nevertheless a magic box. Instead of carrying cash in your wallet, a credit card is easier to manage and convenient to handle. With the changing times, many people have already transformed themselves to the credit card regime, some are under transition phase and others are still cautious to use a card. People who adore a credit card, remark it as value for money because of its benefits like free credit, reward points, deals and offers.

Many however, are not convinced on its benefits because they made a wrong choice while picking their card. If you are in this league and realize its importance in your routine life, read through this article to maximize your benefits from a credit card. Remember, each card has various features that are targeted for a specified set of users. It is you, who need to cherry-pick a card that is a perfect match for your lifestyle. In my editorials on credit card, I always emphasis that one should analyse his payment and spending habits before choosing a card.

If you do not pay off the complete balance of your credit card every month and carry forward some outstanding amount to the next month, then your first goal should be to select a card that offers the minimum interest rate. Whereas, if you pay your balance “in full” each month, then you can move to the other criteria and explore your spending habits, to select a credit card that is just-right for you. For example: If you travel more, then opting for a travel credit card or a card that provides rewards in the form of air miles is suitable for you.

How to choose the best credit card?

There are several important parameters that you should check before selecting your credit card. You should evaluate each of these parameters in a card, that is offered to you by a credit card company and zero in on one that works best for you.

1. Annual Percentage Rate (APR): APR is a numeric representation of your interest rate. When deciding between credit cards, APR can help you compare how expensive a transaction will be on each one. Most credit cards offer a grace (interest free) period for new purchases. If you make complete payment on or before due date, no interest is charged. Whereas if you opt to carry a balance on your card, you need to pay the agreed upon interest (APR) on your outstanding balance.

So, if you pay your monthly credit card dues “in full”, the APR should not be the most important criterion for picking your credit card.

2. Annual Fees: A high annual fees can nullify all the benefits that you get from a credit card in a year. However, many credit card companies have a pre-defined minimum spending limit that is used as a threshold for waiving the annual fees. For example, Citibank charges Rs.1000/- as annual fee on its Rewards Credit Card. It however, waives off this amount if you spend more than Rs.30,000/- in a year. If you are looking for a credit card and your annual spending on the card are more than Rs.30,000, the card provider will not charge you any annual fees. It is advisable to analyse your annual spending against the threshold amount by the card provider, before you select your card.

3. Reward Points: Credit Card companies incentivize their customers with reward points for using their credit card. Some companies provide 5 points for every Rs.150 spent at fuel, fine-dining outlets and hotels. Whereas, you earn 3 Points for every Rs.150 spent on groceries on some other card. It is important to compare the reward points offered on each credit card before you zero in on any one card. If you spend more on grocery shopping in a month than on fuel and dining-out, then it makes more sense to opt for a card with grocery benefits.

4. Reward Redemption: The points accumulated over a period of time, can later be redeemed for cash back, air miles, goods and services depending on the reward program on your credit card. Some card providers offer a plentiful of redeeming options with never expiring points whereas others provide a small number of choices in exchange of their reward points with a limited validity. You should pay attention to all these terms and conditions before you pick a card that works best for you.

Many of us don’t know about the reward program and its benefits. And there are many, who do not value the importance of rewards on credit cards. But believe me, if picked wisely and used right, your credit card rewards can work magic for you.

5. Due Date: Check the credit card due date while you research for several credit cards before applying. A credit card with its due date as 30th of every month might not work for you because your account gets credited with a salary on 1st of every month. Whereas paying bills on 5th of each month can be suitable in your case. To avoid any delay in payment, you should always be careful with the due date and should opt for one that is feasible for you.

6. Customer Care: The customer care service play an important role during your journey with the card. If you want hassle-free card operation, always opt for a credit card that has a world-class customer service. There can be times when you are unable to repay your credit card bill by the due date. An efficient customer care unit is one that listens and understand their customer’s problem. It might be possible that your customer care executive, after listening to your problem, extends your grace period by 2 more days without charging any late fees.

7. Grace Period: Although most card providers offer almost similar range of grace or interest-free period (usually ranges between 45-55 days), having additional 4 days can sometimes make a big difference. You might prefer a card with grace period of 52 days over a card that provides an interest-free period of only 45 days.

It is becoming confusing marketplace, with card sponsors featuring reward points, cash back and other incentives to get your business. Sometimes we get driven by these lucrative offers and ignore to look at the basic features like annual fees, joining fee, interest rate, grace period, etc. A credit card can look rewarding sometimes but once we start using it, the high annual charges might kill or neutralize all the benefits.

The credit card issuers might offer you extra air miles on your credit card but that makes no sense if you do not travel by air. They might offer extra reward points for a limited time duration, and if you forget to redeem those rewards, then it’s not worth using a reward card.

Select a credit card on the basis of your spending behaviour, rewards program offered and its redemption rate. To maximize your rewards, zero in on cards that reward you generously for everyday activities like shopping or banking.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.

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