Credit cards can add a lot of convenience to your life. They enable you to make payments, even when your bank account is short of funds. Also, you no longer need to carry a wad of cash around, as you can shop for anything or even buy fuel or pay bills with this plastic money. They are a great asset, provided you know how to use them correctly. So, here are a few things to know before making a credit card application.
- Kinds of credit cards
It is a good idea to get to know the different kinds of credit cards available in India. For instance, if you are using a credit card for the first time, you can enjoy a low limit and a low annual fee, with a beginner-level card.
- Significance of your income
Information about your income is important to your card issuer to estimate your bill repayment capacity. Before you apply for a credit card, the company may ask for your income proof documents. The choices of cards available to you will increase as your income bracket rises.
- Relation to your credit score
Your credit score is linked to your credit card in many ways. Your credit score can be impacted if:
- You use your credit card to its maximum limit every month
- You are late in making payments to clear your credit card dues
A bad credit score implies a poor capacity to repay debts, which may in turn impact your ability to take a loan. Hence, you may wish to choose a card with a sufficient limit that allows you to take care of most of your expenses. Of course, ensure that you can repay the amount comfortably and on time. After you get used to managing a card effectively, you may choose to raise the credit limit further.
- Credit card terms and policies
Read all the information related to your credit card. The terms and conditions will be provided to you by the issuer when you apply for a credit card. This includes your credit card interest rate, applicable fees, due dates, and more. Fees may include annual fees, over-the-limit charges, late payment fees, cash advance fee, GST (goods and services tax) and foreign currency mark-up charges. Also, go through the card policies to know about rewards and other details.
- Minimum payment
The issuer may give you the facility of repaying a nominal or minimum amount by a certain due date and clear the remaining amount at a later date. Of course, you can pay more than the minimum amount in case you have the funds handy. This minimum amount is usually a percentage of the total bill.
Before applying for credit cards, try to know everything you can related to their efficient use. Also, ensure to clear your credit card dues on time, so you can enjoy this convenience without any late fee or additional charges.