New to Credit Cards? Know all essentials

A credit card is a small piece of plastic that packs a big punch. As a student or young professional, a credit card not only gives you the independence to take charge of your spending but also shapes your financial future. How you use and pay for the service impacts your ability to secure other credit products in the future, such as a personal loan, car loan, or home loan. Therefore, choosing the right credit card is one of the most important decisions you will make. 

Considering that you are just starting out on your credit journey, the options at your disposal may be limited. However, the great thing about credit cards is that they let you build on your financial standing and scale up your spending limits or perquisites over a period of time. 

If you have some form of income to show and no large existing debt, you’re already started on the right foot. So, here’s everything you need to know to select the best credit card for your needs and use it wisely.

Factors to consider when deciding on a credit card

There are multiple variables to consider when choosing the right credit card. Given the wide array of options available, first and foremost, you need to have clarity on what will you primarily be using the card for.

Here is a checklist to consider with respect to getting a credit card.

1. Credit requirement: 

Cards with excellent benefits are usually reserved for applicants with a strong and long credit history. Banks don’t share the credit score threshold for each of their cards. However, you can get a general idea from a service representative to help you narrow down your options and improve your chances of getting a new credit card.

2. Interest rates: 

Knowing a card’s interest rate is important, especially if you believe you will occasionally be carrying balances forward or converting transactions into EMIs. You would want to consider a card that has a low Annual Percentage Rate (APR), so your interest costs can be minimised.

3. Fees: 

Credit cards may come with various operational fees and charges that can impact your cost of using the service. This includes joining fees, annual maintenance charges (AMC), late payment fees, over limit fees, balance transfer fees, foreign currency transaction fees, etc. Joining fees and AMC are usually associated with premium cards that provide a multitude of perks. Often these charges are waived off when your annual spend crosses a specified threshold.

4. Rewards and benefits: 

Most credit cards have a tiered system to earn rewards and bonus points. This will vary with offline or online merchants across select product categories or brand partners. In addition to a lucrative reward program, look for a card that allows for flexibility of redemption, whether as cashback, reduction of the balance payable, or air miles. Many new-age banks like IDFC FIRST Bank offer bank credit cards with no expiry date on the reward points that can be accumulated and redeemed anytime you desire.

Purpose of the credit card

When used responsibly, a credit card can be a strong financial tool. With a variety of benefits such as rewards, cashback, and other value-added features, a credit card can become your primary mode of transacting for various purposes.

1. Shopping: 

You can find deals on everything from paper clips to high-end electronics pretty much all year round with your credit card. These may be in the form of higher rewards per rupee spent that can be redeemed for purchases later, cash discounts, or the option to convert your high-value purchases into no-cost EMIs.

2. Travel: 

Credit cards allow you to earn discounts on travel fares and hotel bookings. Many cards even allow you to redeem points for air miles, helping you make travel more affordable. A credit card also makes it easier to spend in foreign currency on your trips abroad without the hassle of carrying too much cash.

3. Personal: 

You can manage all household and personal expenses on your credit card, from groceries and utilities to rent or down payment of a new car! A credit card can also help you tide through tough times like a medical emergency or help you stay afloat in case of a layoff. 

4. Business: 

A credit card can provide the much-needed liquidity for entrepreneurs and freelancers – from managing operational expenses to stop-gap funding and more. A credit card can offer a loan on demand to small business operators. It also allows you to consolidate all business expenses in one place, further simplifying your accounting process.

Tips to use your credit ard effectively

Credit cards should always be used judiciously. If you aren’t careful, you could end up with a lot of debt and damage your credit score. Here are some best practices to follow,

1. Monthly dues: 

Make all your credit payments in full (whenever possible) and before the due date. This practice will help avoid interest charges and late fees and adversely impact your credit standing.

2. Credit utilisation: 

Credit utilisation refers to your outstanding debt or credit consumption as a percentage of the total credit available to you. It is recommended is to keep track of your credit utilisation as this keeps your spending in check and also helps build your credit score.

3. EMIs: 

If you are looking to convert some purchases into an EMI, avoid the temptation to go for longer tenures with smaller EMIs. As attractive as they look, a longer tenure will add on a significant interest burden and doesn’t reflect well on your repayment capacity. Select the shortest possible tenure that you will be able to service comfortably.

4. Credit limits: 

If your credit habits are good, the card provider may offer a higher limit on the card. Such limit enhancement should be welcomed not just for spending but also to bring your credit utilisation down.

5. Credit report: 

The credit report will give you a complete insight into your borrowing behaviour and see where corrective action is required (if any) to improve your score.

To get started on your journey of financial independence and a world of possibilities, apply confidently for an IDFC FIRST Bank Credit Card. There are a host of different card options to choose from based on your credit profile and spending needs. Not only are these premium cards free for life with no joining fees or recurring charges, but they also have the most lucrative rewards program in the market. 

Additionally, the low, super-saver interest rates make it possible for you to manage all your personal and business expenses, handle unforeseen contingencies, shop, travel, and do everything your heart desires while building a healthy credit score that will hold you in good stead for the future.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank 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 mentioned. Please consult your financial advisor before making any financial decision.