Looking for a credit card? The sheer number and variety of cards can be mind boggling. Cashback, reward points, air miles, fuel surcharge waiver, discounts, low charges, lounge facilities… the list of benefits and card features is seemingly endless. This profusion of choice makes it difficult for a person to pick the best credit card. Here are some key points to help you choose the right card that suits your unique needs.
Match your usage
The first thing to remember is that no card will suit all customers. It’s best to pick a card that is aligned to your usage and spending pattern. If you do a lot of shopping online, go for credit cards that offer higher rewards for online transactions. Typically, Indian banks offer cards with a relatively more attractive rewards regimen. Some cards offer twice the reward points for online spends. Similarly, if your purchases tend to be category specific, a co-branded card may be a better choice. These co-branded cards give additional benefits on purchases from targeted merchant organizations. Millennials will find these cards especially beneficial.
If you spend a lot on fuel, get a card that waives the fuel surcharge and offers benefits on spends at fuel outlets. There are also all-purpose cards that do not restrict the benefits to any specific category and cover a wide spectrum of spends.
Similarly, purchasing air tickets can be more rewarding with a co-branded airline card. For those looking for exclusivity, select an upmarket card which offers access to luxury airport lounges. If you are a “foodie”, there are quite a few “delicious” cards which save 15-20% of the spend at over 2,000 restaurants.
Watch out for charges
There was a time when credit card companies were pushing lifetime free credit cards. Some issuers are maintaining this attractive offering, but most cards now have a joining fees and an annual charge that ranges from ₹500 to ₹5,000. Cards with high annual fees also offer higher rewards points on card spends. In most cases, you get discount vouchers of equal value to the annual fees. In others, the annual fees is reversed if you spend more than a specified threshold amount in a year.
Paying high fees on credit cards might not necessarily be a bad thing, but only if you are using the card benefits to the fullest. For example, paying a fee of ₹5,000 for a premium credit card might be worth it if you are getting benefits like a lower foreign currency mark-up fee, cash back at duty free shops, free golf course or lounge access and special dining privileges or discounts at top restaurants. So, if you use your credit cards frequently, go for a card with higher annual fees. However, if you have multiple credit cards, it’s a better idea to choose those with lower annual fees.
The card fees may not be a big issue if you don’t have too many cards, but the interest rate charged on the balance is certainly something a cardholder should take note of. The interest rate varies from 1.5% to 3% per month. A card with a low interest rate is obviously a better option, but do remember that if you keep carrying a balance on your card, you will not only pay a fortune in interest but it will also hurt your credit score in the long term. This is why it is advisable to have at least two to three credit cards so that in case you are unable to repay the full amount, the balance can be transferred to another card or converted into easy equated monthly instalments at a lower rate of interest.
Transaction charges are levied on cash withdrawals and expenditure in foreign currency. Most credit cards in India charge the same fees for these transactions, so there isn’t much choice in this matter. But do remember that in most cases, getting a loan on a credit card may be less expensive compared to using your credit card to withdraw cash from an ATM.
Add-on cards for family
Some customers also look for additional or supplementary cards for family members. The expenses incurred on these supplementary cards are billed to the primary card. If you are also looking for a card for your spouse or adult child, check out if the card you have picked offers such a facility.