Credit cards have now become an essential part of our lives. However, with several types of credit cards available in the market, choosing the right one can be confusing for customers. So, few factors become crucial when selecting it.
Here are some factors to be considered while selecting a credit card:
Credit Score
The first thing is checking the credit score - if customers have high credit score, they will get pre-approved for exclusive credit cards.
"It is good idea to check with bank/lending institutions if the customer is pre-approved for any credit card. If the customer is a loyal one, the one-time starting annual fee might also be waived off," says Anuj Kacker, co-founder, MoneyTap.
Certain premium credit cards may even require a good credit score.
Comparative Cost-Benefit Analysis
A comparative cost-benefit analysis of availing various credit cards is essential before applying for credit cards.
"For undertaking the comparative cost benefit analysis, a prospective credit cardholder should carefully compare various card benefits offered in the form of reward points, free vouchers, cash backs, discounts and various lifestyle benefits. He/she should opt for the credit card whose benefits exceed its annual fee by the widest margin," explains Sahil Arora - director, Paisabazaar.
Requirements
The next criterion is to understand the need of credit card. While some may be interested in exclusive deals, others may need it to borrow cash. Some may be simply looking to earn reward points or trying to build a credit history. This is important as a card that is not suited to the needs wouldn’t be beneficial at all and users would lose out on the returns they desire.
For instance, Arora says, a prospective card holder who spends more on work-related travel and hotel stays than on shopping should opt for travel credit card with higher benefits on travel-related expenditure.
On the other hand, shopping credit cards that come with deals and offers every time one shops online and offline are good for those who shop often, according to CRED - a credit card payment app.
Entertainment cards are suited for those who step out often for movies, concerts and other events. In India, rewards and cashback credit cards do well as a lot of people prefer some kind of reward or cashback on every rupee spent on the card, as per CRED.
According to Kacher, it is more important to opt for a card that can help users consolidate their earlier loans with factors like balance transfer, 0 percent APR or a low ongoing rate.
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First Published: IST