Checklist To Look At When You Choose Your Credit Card

Time to read: 4 mins | November 19th, 2018

Credit cards are convenient to use, can earn you reward points and cash-back offers when you spend.

Moreover, credit cards give you access to money (with an interest-free credit period of 40-50 days), offer you an EMI facility (making it easy to consume high-value goods), and in case of an emergency––when you are in dire need of hard cash–––enables you to withdraw money.

These very traits make it desirable to own credit cards that suit your needs.

If you intend to opt for a credit card, keep in mind the following points:

• Cost of the credit card – As mentioned before, with a credit card you gain access to spend money on credit with an interest-free period of 40-50 days. However, depending on the card you choose, there are joining and annual fees.

  Depending on your credit limit and spends, the annual fee may also be waived. Usually, a credit card that offers cash-backs, charges a nominal annual fee. But if you are opting for a premium card with exceptional benefits, there could be an annual fee.

  Hence, it would make sense to compare credit card offers online before you make a final decision.   

• Credit Limit – This is the maximum amount you are allowed to spend on your credit card. Before you use your card, it is vital to know the credit limit.

If you are opting for a credit card for the first time, it would be prudent to opt for a card limit that falls within your means and fits your needs.

• Grace Period – The term ‘grace period’ is the additional time the bank permits you to pay your outstanding dues without any interest charges. Just remember, a longer grace period is more beneficial for you, the credit card holder. 

  But in the interest of your financial well-being, make it a point to pay your credit card dues on time. As far as possible, avoid availing of the grace period and repay regularly.   

• Rewards, incentives and other benefits – Some cards offer reward points or incentives (in the form of cash-backs, discounts, offers, etc.) when you make purchases and these can be redeemed or used at a later date. These are useful as they help you save money as you spend.

  Axis Bank cards also offer complimentary access to lounges in select domestic and international Airports, where you can take a moment to relax in luxury and enjoy lounge benefits.

  Likewise, there is an insurance coverage offered on certain credit cards (to keep yourself, your family, and assets safe), plus discounts on dining and offers on movie tickets catering to your lifestyle needs.

  Therefore, closely evaluate the value proposition the credit card offers.

• Interest rate – When you delay the outstanding payment beyond the 40-50 credit period, or when you aren’t paying your credit card dues in full every month, credit card issuers levy an interest. This interest rate is usually 3-4% per month, depending on the card you choose.

  Also, when you withdraw cash using your credit card, banks charge a high interest rate (in the form of cash advance fee) for cash borrowings on credit cards, without a grace period to repay it.

  Similarly, the EMI facility on your credit card comes at a cost - interest is levied, which usually is 13-15%, depending on the card and the EMI tenure. 

  So, check the interest rate applicable on your card, if you are likely to prolong your payments.

• Read the terms & conditions carefully – To avoid the unpleasant surprises later, always read the fine print of the terms & conditions. If you find anything in the terms and conditions of the card that is not conveyed to you or is contrary to what was conveyed to you, do seek a clarification from the bank.

Do note that once you take the card and begin using it, it will be assumed that you have read the terms and conditions and accepted them. 

Notwithstanding the above points, primarily opt for a credit card that suits your needs. And the best way to asses this is to take a close look at your spending habits – whether you would use it to buy groceries and household paraphernalia; lifestyle needs (dining out, book movie tickets, shopping,); travel purpose (flight tickets, hotel bookings, sightseeing,), during an emergency (hospitalisation, medical bills,) and so on.  This would help you decide on the most appropriate credit card.

To sum-up…

Remember that taking the right credit card is just the first step. Once you’ve made the right choice, make sure you use the card sensibly. Once you do that, a world of offers and convenience in banking will open up for you!

Apply for a credit card today!

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm known for offering unbiased and honest opinion on investing. Axis bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.