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How do I choose a first credit card

Monday, November 07, 2016
By Ranjit Punja

Ranjit Punja is CEO & Co-Founder, Creditmantri

Do you look at the flood of credit cards available on the market and wonder how to choose the most suitable one? A credit card offers freedom and flexibility in paying for your purchases, offers tempting privileges and perks, and is safer than carrying around cash for your shopping – all very good reasons to get one.  If you are planning to get a credit card for the first time, here are some things to keep in mind.

Check your credit score: If you have never had a credit card or taken few or no loans before, chances are you will have a low credit score. It is difficult to get a credit card with an insufficient score. It might be a good idea to apply for a secured credit card as a first card instead. It works exactly the same as a credit card, except that you need to open an FD against the card in case the bank needs to recover unpaid dues in case of default. Using a secured credit card responsibly and paying your bills on time will help you build your score and become eligible for the credit card you desire.

Also check the other eligibility criteria, like income, so that you avoid potential rejection.

Once you have determined that you are eligible for the card you want to apply for, you need to consider the following:
What is the interest rate charged on the balance: While you might get carried away by the perks offered on a particular card, it is most important to check the interest rate first? If you do not pay your bill in full, the interest you pay on your outstanding will negate the rewards you get for spending on your card. It is better to choose a card with a good interest rate than one with fantastic perks and a high interest rate – unless of course, you pay your bill in full every month and carry no balance.

Does the rewards programme suit your needs: It can get overwhelming to choose from the plethora of cards available on the market.  Limit your choices to the cards that suit your lifestyle. For instance, if most of your monthly expenses on the card are for household expenses like groceries and other home essentials, then a credit card that offers shopping discounts would be the best option. If you are a heavy online shopper, then choose a card that offers extra benefits for online purchases. There is no point getting a premium lifestyle card with golf club membership benefits, if you do not play golf. Instead, opt for a card that offers discounts on dining.

What are the fees and charges? Again, while the card might have great perks, it might come with a hefty annual fee or heavy late fees. Make sure you read the fine print so that you do not face any unpleasant surprises later on.

What are the security features? Losing your card due to carelessness or theft is more common than you think. Similarly, all credit card holders face the risk of fraudulent activity on their card. Check the liability in case of theft or loss of your card so that you are fully aware of the terms and conditions in case of such an eventuality.

A credit card can give you an enormous sense of freedom and enables easy and convenient payment for purchases. There are a huge number of cards on the market today, but you need to check the boxes above to make sure that you choose the one that is best for you.

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