How to choose the right Credit Card?
Let’s unlock the mystery of picking the right credit card in #MoneyMantraWithJhilmil ‘s new episode. Don’t we all love to get that super rewarding shiny piece of 10*10cm card which gives us the freedom to spend beyond our means? Yes, we all do. Credit cards can be the wisest way to get a virtual loan with zero interest. And also along with discounts & offers on everyday shopping with points to redeem, the way you want. But the trick lies in “How do I pick the right Credit Card?“
How do I pick the Right Credit Card?
If you’re looking for the right credit card that suits your lifestyle expenses and goals, then the easiest way is to track your past expenses, your lifestyle and ask yourself a “lot of questions” about your habits. There ain’t one standard theory or formula to answer your question: What type of credit card is the best? More so it often gets confusing with so many credit cards available to cater to the wider group of people.
Here are 5 ways to choose the right Credit Card for yourself:
1.Annual and Renewal Fees –
The first thing you should check while selecting the best credit card is the upfront amount that you need to pay and the renewal amount every year. Always check the credit card services with your existing financial institution (banks). They could waive off some charges and some can even provide you with the exclusive benefits that might be suitable to your goals.
2. Credit Limit offered –
The second point you must check is the credit limit and the cash withdrawal limit being offered. Your limits must match your monthly expenditure pattern. If the limit is too high, then you might be tempted to spend more than your budget. If the limit is too less, it will restrict your card usage to smaller transactions. This can in turn hamper your chance to earn handsome points and consequently rewards.
3. Grace Period to pay outstanding amount –
After your monthly bill is generated, every credit card issuer gives you a certain time frame in which you need to pay your bills. If it remains unpaid/partially paid, the interest may get accrued. In the nutshell, the grace period is the number of days between your credit card statement date and the payment due date. Usually, the average grace period is between 7 days – 15 days.
Always ensure that you clear your outstanding amount within this grace period to avoid accrual of Interest.
4. Interest Rate charged on the outstanding amount –
Let’s talk about the “Elephant in the room”. Interest accrued, is a point that is not transparent from a user’s perspective. The Interest Rate charged on the outstanding amount on your credit card is way higher than any type of loan. This interest charged is typically in the range of 35%- 45 % per annum. So while comparing credit card options, do look in finer details on wrt Interest rates (annually).
Pro tip: Reiterating, always pay the full amount due on your card instead of just paying the minimal amount, as even the rest of the amount attracts interest charges. I’ve linked my credit card bill payment with my bank account, so it gets automatically debited on the last due date to the full amount.
5. Rewards and Perks on expenses –
This is one of the biggest USP of credit cards. The most lucrative parameter while choosing the right credit card is the offers & reward points that you can earn on your shopping. Hence, always compare whether the benefits offered are relevant to your lifestyle needs and goals. Many credit cards are co-branded, which gives maximum benefit if you shop from the partner brand. Shopping, travel, fuel are few popular categories to earn reward points.
Further, as an aware person, also check if these reward points have any expiry or redemption restrictions.
Pro tip: Self Analysis of your detailed statement is something that every credit card holder must do. Check your transactions, charges *if any*, reward points every month. Such a regular exercise will alert you in case of any discrepancies.
Hopefully, you would’ve got an answer to How to choose the right Credit Card. Right credit card will support you in achieving your financial goals in a very affordable manner.