Credit cards, when chosen wisely and used responsibly, can help you save a significant amount on your regular spends. However, with numerous options available in the market, each catering to varied spending categories, finding the right one for you could be difficult. When searching for a credit card, you must understand that no single ‘perfect’ credit cardis better than all other available options. The right card for you will be the one that fits your spending patterns and gives you maximum value-back on your preferred spending categories. Along with this, several other factors such as credit score, eligibility, fees and charges, etc. would come into play.
Here are some things to keep in mind when finding the right credit card for you.
Identify the Purpose of Getting a Credit Card
Before beginning your search, you must first understand the purpose of getting a card. Generally, people have three main reasons of getting a credit card- 1) to save on a particular category of spends, 2) to get additional purchasing power or a means to make big-ticket purchases, and 3) to build or repair their credit score. Based on why you are looking for a new credit card, you can shortlist the available options that match your requirement. For instance, a basic entry-level low fee credit card or a secured credit could help you build your credit score. However, ifyou are looking for a card to save on a particular category, you should compare multiple options.
Shortlist cards based on the Overall Value-back they offer
Different credit cards have different ways of offering value-back to the users. Some cards offer reward points while others offer direct cashback. Some cards are co-branded and offer accelerated earnings on the associated brands whereas other might provide extra earnings on one or more spending categories. When shortlisting cards, you should know the type of value-back you would prefer. For example, if you make most of your purchases via Amazon, the Amazon Pay ICICI Credit Card could be the right match for you. However, if you prefer making purchases online but are not loyal to a particular brand, a card that provides significant savings across all online spends could be a better choice, such as the Cashback SBI Card.
Moreover, credit card reward structure can also be slightly confusing, since points are not equivalent to their monetary value. Hence, it is important to check what the reward points are worth. The conversion rate might also vary as per the redemption category. For example, if you choose to transfer your HDFC Regalia Credit Card reward points into air miles, you will get 0.5 air miles for each point. Whereas, if you choose to convert the rewards into cashback, you will only get Rs. 0.20 for each point. Hence, you must check the value of reward points, instead of choosing a card basis the number of points offered.
Consider the annual fee
While annual fee should not be the sole deciding factor when choosing cards, it could be an important point to consider when comparing the card’s overall value. Premium cards usually charge a very high annual fee but also provide benefits across multiple categories, the combined value of which surpasses the fee charged. At the same time, there are cards that charge a low annual fee but offer substantial value on one particular category. When making a choice, consider whether you would be able to maximize the benefits, only then will it be worth to pay a high annual fee.
Check what you are eligible for
Instead of applying for multiple cards at once, it is better to apply for a credit card for which you have a higher chance of approval, based on your income and credit profile. Individuals with no credit history and low income might have limited options to choose from, as many providers do not offer cards to new-to-credit customers.However, if you have a high income and a good credit score, you would qualify for multiple credit cards from leading issuers, giving you opportunity to make the choice from a wider selection. Financial marketplaces like Paisabazaar.com provide you a single platform to check offers from multiple card issuers. On such platforms, you can also check your chances of approval for different cards.
Choose how to apply
You can choose to apply directly with an issuer or via third-party marketplaces. Most card issuers now have a seamless digital application process. However, you must understand that multiple credit card applications within a short span can make you seem credit hungryaffecting your credit profile negatively. Hence, understand your requirements, compare available options and check eligibility before applying for a particular card.
Choosing the right credit card is a crucial step as it is easier to derive maximum value out of a card that matches your spending pattern. However, what is even more important is its disciplined usage. To maximize benefits, ensure responsible usage by spending as per your repayment ability, making on-time bill payments and maintaining a healthy credit utilization ratio. With responsible usage, you will be able to avail maximum savings and, at the same time, build a strong credit profile.
Disclaimer: This content is part of a marketing initiative. No TNIE Group journalists were involved in the creation of this content.