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A credit card is one of the best credit instruments for salaried and self-employed individuals. Much of its popularity stems from the fact that it comes with numerous features and benefits to avail of while travelling or making purchases. When it comes to making a credit card comparison, you are usually left with more confusion than with the ability to make an informed decision.
It is worth noting that too much credit card evaluation and analysis could lead to analysis paralysis - an inability to choose a credit card that best fits your needs. We have prepared a list of the top factors you need to consider while making a credit card comparison.
Factors to consider when making a credit card comparison:
Before making up your mind to purchase a credit card for yourself, it would be wise to understand your financial profile and spending habits. Your income and credit score are the two most crucial parameters considered by your issuing bank to get you approved for a credit card. A stable income and a higher CIBIL enable you to choose a credit card that comes with maximum reward points, bonuses, insurance, surcharge waivers, etc.
Also, there are simple standard credit cards available in India that you can opt for to build your credit score. Besides your credit score, you must also consider your spending habits. Since your credit card is not a source of money, you will need to make repayments at the end of every month.
To get a new credit card, apply through an online platform that offers a hassle-free process.
Not everyone has the same need or want. One may opt for a credit card to manage daily expenses, and the other may simply for emergencies. Before making a credit comparison, you must know why you need a credit card. Knowing why you want credit helps to choose a specific type of credit card to compare. It enables you to choose one that caters to your needs.
Choosing a credit card depends on your needs. For instance, if you are a frequent traveller, you may want to opt for a credit card that offers hotel and travel rewards. Most cards offer complimentary access to airport lounges. If you are a small business owner, a cash bash card would best suit your needs. Also, if you want to get a card to build your credit score, look for a credit card with a low APR and no annual fee.
The minimum payment that you are required to make to avoid higher interest charges depends on your credit card. It generally ranges between 5% to 10% of the outstanding balance. Before choosing a credit card for yourself, you will need to check with the issuing bank to know about the minimum payment percentage. Your priority should be to make full payments.
If you cannot make a full payment, you will be charged based on the total outstanding amount. For instance, you may be charged Rs. 100 on an outstanding amount of up to Rs. 500 or Rs. 350 up to Rs. 2000.
While choosing a credit card, it is advisable to compare different credit cards’ annual fees. These fees range between Rs. 500 to Rs. 3000. Generally, credit cards with more reward programs come with higher annual fees. However, you should not give up your hopes of finding a credit card that comes with maximum rewards and no annual fee.
A word of advice: While making a credit card comparison, make sure that the reward programs and other benefits make your credit card fees worthwhile. For instance, getting a travel card that offers travel insurance, complimentary airport lounge access, priority boarding, and free check bags is worth the higher fees.
Both VISA and Mastercards come with numerous offer rewards for transactions made through them. Some credit cards offer a percentage of the total spending as cash back, while others offer reward points or travel miles for every rupee you spend. For instance, credit cards in India offer cashback for purchases of select products from merchants like Amazon and Flipkart.
Most low or no annual fee credit cards offer up to 1.5% cash backs for purchases in any spending category. On the other hand, you will find high annual fee credit cards that offer benefits such as travel, dining, entertainment, groceries, etc. So, knowing how you are going to use your credit card enables you to choose one that best serves your needs. For instance, a travel credit card makes more sense if you are a frequent traveller.
Your credit card can have different interest rates, such as APRs for purchases, cash advances, balance transfers, etc. These rates vary across different credit cards. While making a comparison of your credit card interest rates, you will understand whether or not you can repay the balance amount in full every month. If you can pay your balance in full, a higher APR may not hurt your finances. But, if you are not sure, you may want to get a card that comes with the lost APR.
Keep in mind that even a high rewards credit card cannot compensate for the interest accrued with a high APR. Try to find 0% introductory APR credit cards if you want to make a large purchase and repay the amount over time.
Besides the interest rates and annual fees associated with credit cards, you will also need to incur transfer fees, foreign transaction fees, cash advance fees, late fees, returned payment fees, etc. The extra fees and penalties depend on how you are planning to use your credit card. If you can avoid cash advances or balance transfers, you can get a card that charges high fees on such services.
While finding a credit card, it is imperative to make a comparison of the credit cards available. It enables you to choose a credit card that offers maximum reward points, bonuses, discounts, and benefits. First of all, assess your needs and choose one that caters to them. For instance, if you are a business owner who travels frequently, it is best to get a credit card that offers travel benefits.
If you want to purchase a new credit card, apply online and enjoy a hassle-free application process at Kotak Mahindra Bank.
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