How to select the best credit card?

How to select best credit card

Every bank offers an array of credit cards with small variations. In this article let’s see how to select the best credit card that suits your needs and to get maximum benefits.

Joining Fee/Annual charges/Renewal fee

Whenever you buy a credit card you must check what are the annual fees on it?  Is there any joining fee? Etc., There are several cards that come for zero annual fee and joining charges. Some credit cards put an annual minimum spend to get the card fee waived off. It is always better to go with zero charges (no joining/annual fee) card especially if you are new to credit card usage.  However, if you find charges are reasonable and give you more benefit for the given cost then you can go for fee-based credit cards.

Interest rate/other charges

It is always best to pay your credit card bills fully before the due date. However, there might be unavoidable circumstances where you may not be able to pay your full dues off. During that time it is important that we don’t lose too much on interest. Hence it is recommended to choose a card that has less interest rate.

Also, you must note the other charges such as fuel surcharge (A charge imposed on you for paying petrol/diesel bills using the credit card. Most of the credit card companies waive this charge), Currency mark-up fee if you use the credit card for an international transaction.

Spend pattern

You might be wondering how spending pattern might influence which credit card you should choose.  This is important because reward points for every spend category vary. For example, if you use the credit card for fuel spends more, then you must choose a card that gives more reward points for fuel. If you spend more on retail/ online then go for a card that offers more reward point value in retail spend. There are also certain co-branded credit cards available in the market, however, I wouldn’t prefer one because of the value of using them on other spends (apart from the co-brand) is very less.

Reward points

Every credit offers you reward points on your spend.  Reward points are points that are offered based on your purchase value, where you purchase and what you purchase. For example, if my card says 1 point per ₹100 spends. It means it will offer you 1 reward point for every 100 you spend. These points may or may not have expiry date based on your credit card provider. You must accumulate these reward points to convert it later to purchase products or cash back. In this, we must ensure our card gives the best reward value.  A sample calculation to find the best value credit card is illustrated in below table.

  Card A Card B Card C
Reward Points 3 points for every ₹150 spent 2 Points for every ₹150 spend 3 Points per ₹150 spend
Point value 25 paise per point 30 Paise per point 20 paise per point
Value per ₹100 spends  (100*3/150)*.25 (100*2/150)*.30 (100*3/150)*.20
Value per ₹100 spends ₹0.5 ₹0.4 ₹0.4

 Offers

Offers are something that is irresistible. There are several promotional programs that incentivize us for using credit cards. For example, Citi bank and HDFC bank credit cards offered cash back on the purchase of iPhone. Likewise, you should look for cards that provide more offers online/offline. Based on my experience HDFC bank, Citi bank, Axis bank, ICICI bank, SBI bank, Yes bank, standard chartered bank, Amex, IndusInd bank give many offers.

Loans

There are certain cards that give you a loan based on your credit limit at lesser interest than the personal loan. For instance, when you use HDFC bank credit cards they provide Cash on-call loan (utilizes your credit limit) and jumbo loan (that doesn’t utilize your credit limit). Hence look for cards that can also provide you with cheaper loans when you need money in an emergency situation.

Easy to Pay

When you buy credit cards, check what are all the payment methods available to pay the credit card bill and if you are comfortable with them. Certain bank executive might do a tie-in sale stating you need to have an account with their bank to get the credit card and make payment for it. Don’t become a prey for it.

 

Also Read, What is a credit card and what you should not do while using a credit card?

Credit cards are gifts when you use it wisely, whereas they are a curse when you use to wrongly.

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Tags: Credit cards

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