For most individuals, credit cards come as a savior during cash crunch. There are an array of credit cards that banks offer to their customers, however, choosing the right one based on your spending will be helpful in the long run.
Types of Cards
Banks tie-up with stores to bring you attractive discounts and opportunity to get a lifestyle or shopping card. A lifestyle or shopping card offers a number of benefits such as deals, discount, cashback and rewards. These cards may also give you access to exclusive sales, and help fulfill your grocery and household buying needs.
If you are a frequent traveler, be it for business or pleasure, a travel card helps you earn miles when you spend it. It may also provide you insurance coverage for your life, baggage and travel time and can also be used to access lounges and concierge services like flight, hotel and cab bookings.
Entertainment cards provide huge discounts and cashback offers on the purchase of movie tickets, clubs, and dinners among others. They may also offer free tickets, complimentary drinks and earn reward on your spend.
When it comes to spending on fuel, there are a few limitations such as some cards require you to fill up only at specific petrol pumps or swipe on the bank’s specific machine. However, it may help benefit you by giving fuel surcharge waivers.
Apart from identifying the right card for yourself, you also need to understand the details of each card that you are going to pick. According to BankBazaar.com, here are a things to keep in mind:
Billing cycle: Banks usually set the billing date as the 15th or 20th of every month. Knowing this date is important to get a longer interest-free cycle. If your interest free credit period is 45 days and the billing date is 15th, then when you make a purchase on 14th, it will be billed the next day and you do not have a long free credit period. If you make the purchase on 16th, you will get the full 45 days to pay your bill back.
Interest Rate: You are charged interest only when you carry forward a balance. If you pay your bills in full, you will never incur interest. So if you are one to pay your bills on time and in full, interest rates shouldn’t matter much.
Annual Fees: Most credit cards carry an annual fee, joining fee and renewal fee. If you are one to use your credit card sparingly, go in for a credit card that does not carry annual fees. Some cards waive the annual fee if you spend above a certain limit. So if you are a big spender, you needn’t worry about the annual fee.
Late Payment Charges: Be aware of how much your bank charges if you miss the payment due date. Banks also increase your interest rate when you default on a payment.
Cash Credit: Cash credit usually carries high interest rates and no credit free periods. So cash should be withdrawn only if absolutely needed. Know the details before you use your credit card to withdraw money.
Rewards: If your bank is offering reward points, don’t be taken away by how many points you can earn on your credit card. Credit card reward points are just a small reward for spending on your card. You can usually earn 1 point for every Rs. 100 you spend. You can redeem these points at an average rate of 1000 points for a Rs. 250 - Rs. 500 voucher. So it might cost you Rs. 1 lakh to earn a voucher worth Rs. 500. You can view reward catalogue before you apply for a credit card to see if your rewards are worth it.
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