How to Choose the Right Credit Card in Four Easy Steps

January 25, 2022 Mutual Fund

If you are planning to get a new credit card and/or searching for the best credit card from the plethora of options, let me tell you that there is no-one-size-fits-all credit card! So, it is important to choose the right credit card that matches your requirements. But, how do you choose the right credit card from the hundreds and thousands of options? In this article, we are going to discuss how you can choose the right credit card in four easy steps!

Choosing the best credit card for you can be overwhelming with the sheer number of cards available. If you have a pre-approved or pre-qualified offer from a credit card issuer and it matches your requirements, the process will be much smoother as you will have to submit only a few key documents and provide your confirmation. However in most cases, a customer has to find the right card for themselves on their own, which can be a daunting process. To make the process simpler for you, here are four easy steps you can take to choose the right credit card:

1. Know Your Credit Score:

The first step in finding the ideal credit card should be checking your credit score and credit report. Nowadays, many online portals let you check your credit score for free. They even give you insights into your credit report about the factors that affect your credit score as well as offer advice on improving your credit score.

Your credit score decides which cards you qualify for. Most top credit cards that offer maximum reward points require you to have an excellent credit score. However, even if you have an average credit score or no credit history, you can still be eligible for Starter credit cards. Once you know your credit score, you are ready to move to the next step.

If you found out that you do not have a required credit score to avail of a credit card, you should try to improve it first. Click here to know more about credit score and how to improve it.

2. Know Your Needs:

To get the best credit card for you, understand your needs first. If you get a credit card on a recommendation of your colleague or friend, it might not prove to be the right card for you because each one has different requirements and expectations from the credit card.

There are numerous types of credit cards, but they can all be roughly divided into three categories; APR, Rewards, and Credit building.

• Annual Percentage Rate (APR): APR is a yearly interest rate charged on credit card dues. The APR on credit cards can be anywhere from 12% to 36% p.a. However, the APR is charged only if you fail to make the repayment within an interest-free period or have opted for a credit card EMI facility. If you are already in a huge credit card debt and looking for a way to come out of it, 0% APR credit cards or Balance Transfer credit cards are ideal for you. These cards have 0% introductory APR and they are great for the balance transfer of your existing due or big value EMI purchases.

• Rewards: The reward credit cards are a good choice if you frequently shop using your credit card and repay your dues on time. These cards come with high APR, but offer more reward points as most reward cards are co-branded and specialised. The rewards can be offered in the form of reward points that you can redeem once you meet a certain spending requirement, cashback/s that automatically gets credited into your credit card account/ statement and does not require you to redeem them, flyers miles that you can convert to get discounts on flight tickets or even earn free flights. However, you should know that these cards are usually offered to individuals with excellent credit scores.

• Credit Building: If you do not have a credit history or your credit score does not make you qualify for high reward earning credit cards, the starter credit cards, designed to help build credit history, are a good choice. These cards generally have an average APR and offer reward points to some extent. These cards might not offer a higher credit limit, but if you need a higher credit limit, you can get a secured credit card. A secured credit card is offered against a security deposit.

Once you know your basic requirement of having a credit card, you should focus on its sub-types and find out the right type of credit card for you.

3. Know How Much You Are Willing to Pay:

Before getting a credit card, it is vital to know what does the credit card cost you. Consider these below-mentioned fees and charges when choosing the card:

• Joining Fee: It is a one-time fee charged by the credit card issuer for providing the credit card facility. The joining fee can be very high for high-end credit cards. However, many starter credit cards come with zero joining fee or offer rewards of the same amount as the joining fee.

• Annual Fee: Most credit cards charge an annual fee that can range from Rs 500 to Rs 2000. However, some premium credit card issuers waive off the charges on achieving minimum spends.

• Annual Percentage Rate: APR is a yearly interest rate charged on the due amount in case you do not make the repayment before the due date.

• Late Payment Charges: The late payment charge is a fixed amount charged to you for all the repayments done after the due date. If you do not pay your credit card dues on time or frequently miss your credit card repayments, the issuer might charge you an extra fee for the subsequent payments.

• Cash Withdrawal Fee: The credit card issuer charges a heavy fee for cash withdrawals done on the credit cards. Hence, cash withdrawals or cash advances should be avoided no matter what type of credit card you are using.

• Foreign Transaction Fee: The credit card issuers charge you with a foreign transaction fee for any international transaction done–online or offline.

4. Compare the Credit Cards:

Once you know your eligibility and requirement, it is time to choose the best-suited credit card. It is advisable to short-list a few credit cards considering the points mentioned above and compare them on different criteria. Many online portals let you compare different credit cards with their features, benefits, charges, eligibility, etc. Since these cards will have similar features and benefits, you should find the card with a higher overall value. With an online comparison of your short-listed credit cards, it is easier to find the card that offers a higher overall value. Once you have compared and selected the best-suited credit card, you should choose the right way to apply for it. The online process is advisable to get a credit card, it is a faster and more secure than an offline process. You can visit the official website of the credit card issuer (bank/ NBFC), choose the credit card you have selected and click on ‘Apply Now’. Once you submit the correctly filled form along with the necessary documents, you will instantly get an application confirmation from the credit card issuer. With an online application, it typically takes 7 to 30 days to receive the credit card.

To Conclude:

With so many options available in the market today, it can be hard to choose the right credit card. But, knowing your requirements is the key to get the best-suited credit card. Hence, instead of opting for a card based on an advertisement or recommendation, understand why you need a credit card and choose the right type. Also, while comparing the cards online, apart from their features and benefits, consider different fees and charges too. If you are applying for a credit card for the first time, here are 10 things you should know before getting your first credit card.

This article first appeared on PersonalFN here