In this digital era, applying for a credit card is not a mammoth task. However, managing a credit card is a big responsibility. If you’re unaware of the charges, features, and benefits of the credit card, you won’t be able to take full advantage of it. Also, the mismanagement of your credit card can increase your obligations. Below is the list of factors you should know about credit cards before applying for them.
- Annual fee
Annual fee is the amount you pay to the credit card issuer to keep your account active, and it’s different from the interest you pay on balance. The annual fee is a common type of charge that almost every credit card issuer charges from its customers every year. However, there are a few issuers who divide this fee and charge it monthly. Before finalising your card, make sure that its annual fee is something that you can afford consistently.
Several credit cards offer a lot of benefits, and at the same time, charge a hefty sum as the annual fee. In such a situation, instead of getting lured by offers, check whether all those benefits will exceed the annual fee. To attract customers, many credit card issuers offer a waiver of the annual fee for the first year and start charging a substantial annual fee from the second year. So, it’s better not to get tempted by such offers.
The best credit card offers you a waiver on the annual fee if your annual spending surpasses a specific threshold level.
- Annual Percentage Rate (APR)
APR is the interest rate that you pay for the unpaid amount of your credit card bill. Ideally, you must pay the entire bill every month on or before the due date to avoid paying interest as the interest rates of credit cards are very high. But, in certain months, you may not be able to pay the entire amount due to various reasons. Hence, it’s better to select a card that charges a low-interest rate. Several credit cards offer a lower APR for the first few months and increase them exponentially after that. Stay informed and stay away from such issuers. The monthly interest rate of best credit cards ranges between 3-4%.
- Late Fee
If you fail to pay the minimum balance of your monthly bill by the due date, your credit card issuer will charge a penalty called the late fee. A frequent missing of the due date can harm your credit score. Apart from this, your card issuer may reevaluate your creditworthiness; may increase your credit card interest rate, and lower your credit limit. While applying for a credit card, check how much the card issuer charges for late repayments.
Credit limit implies the utilisation limit of your credit card, i.e., the highest amount you can spend in a billing cycle. You’ll be able to know your credit limit only after its approval as the credit card issuer decides it. Usually, card issuers use your income, age, liabilities, etc., to determine your credit limit. If you’re not comfortable with the credit limit, you can request the card issuer to change it.
It’s essential to use your credit limit wisely as it plays a vital role in determining your credit score. Several card issuers allow you to exceed your credit limit, and they charge you a fee, called the over-limit fee, for the same. But, if you exhaust your credit limit frequently, your credit score will diminish.
Foreign Transaction Fee
If you make transactions out of your country using credit cards, your card issuer will charge a foreign transaction fee from you to process it. Yet, the best credit card issuers do not charge this fee.
Rewards and Cashbacks
Rewards and cashbacks are fascinating credit card features. These perks allow you to save money while spending. These reward points can be redeemed for discounts or gift coupons, which you can use for future purchases. Besides, credit card issuers also offer exclusive discounts for their members. Before taking advantage of these benefits, check the conditions for redemptions and ensure that you’re not overspending while availing of the perks.
The period in which your credit card issuer doesn’t charge any interest for the balance is known as the grace period or interest-free period. The grace period is available only for new purchases, and it usually ranges between 15 to 45 days. While applying for a credit card, don’t forget to check the grace period. To avail of this benefit, you should clear all your previous balances.
Types of Credit Cards
Today, card issuers offer a plethora of credit cards. And each card has its own unique features and purpose. Also, they differ in their charges. Certain cards offer you ample rewards but charge exorbitant fees, while there exists a few cards that give a waiver on fees if your spend up to a particular limit. Credit cards that do not take the annual fee and joining fee are known as free credit cards. Free credit cards also offer a wide range of benefits.
Terms and Conditions
It’s essential to read the terms and conditions of the credit card carefully before applying for it in order to avoid later confusion. Apart from the above-mentioned fees, several other charges are linked with credit cards. Hence, understand the charges and essential details of the credit card ahead of filling the application form.
Maximum Number of Cards You Can Hold
Though there is no restriction on the maximum number of cards you can have, you should not hold more than two. More the number of cards you have, the more charges you’ll be required to pay. Also, there are chances that you may overspend, which may lead to an increase in your liabilities.
Putting It All Together
The best credit card is one that has lower fees and higher benefits. Before applying for a credit card, take time and read its terms & conditions carefully. Otherwise, you may end up paying interest and penalties. Bajaj Finserv RBL Bank SuperCard offers the features of four cards in one. It acts as a credit card, loan card, cash card, and EMI card.