How To Choose the Right Credit Card
Moneylife Digital Team 20 November 2020
Credit cards have become a popular and convenient mode to make payments for goods and services. A credit card can help you to improve your credit score, if you spend wisely and make your full payment before the due date. You can also enjoy great discounts, cash-back and good deals that are often on offer. One can also use credit cards to buy expensive items/ white goods on EMIs (equated monthly instalments). One can also use credit cards in emergency situations when one needs money urgently. Credit cards offer an interest-free period of up to 45 days and are useful for hassle-free transactions online and offline. 
 
Many different kinds of credit cards are available to cater to the varied needs of customers. One can select the credit card that is best suited to one’s spending habits and, accordingly, save more on daily expenses through reward points, cash-back, discounts, offers, etc.
 
People looking to take a credit card often find it difficult to zero-in on the perfect credit card. Unfortunately, there is no single card that meets everybody’s needs. The best way to find the right card for you will depend on your personal spending patterns and interest in rewards. It is advisable that you take a step back and understand your reason to opt for a card; this will  help you in your decision-making process.
 
Here we share tips and guide you on how to choose the right credit card. Credit card is a double-edged sword which can build as well as destroy your credit history. Hence, it is important that you learn about all the details related to a credit card before applying for it. 
 
There are various factors, like offers, discounts, cash-back, charges, fees, payment options, services, terms & conditions and the credit limit, that you must carefully check while choosing a credit card.
 
Regardless of the type of rewards you receive, many cards have reward schemes that expire. Whether you choose to redeem rewards frequently or accumulate and redeem for something big, make sure to use the rewards before they expire. Often, credit cardholders accumulate rewards and fail to redeem them before they expire. 
 
Some credit cards offer loyalty programmes which accept credit card rewards. This is another way to utilise rewards. For example, Standard Chartered Super Value Titanium Credit Card has the Good Life Program where reward points can be redeemed for discounts on purchases on travel and hospitality.
 
What Is Your Lifestyle?
Credit cards are not just a convenient financial mode of payment but also a lifestyle accessory. In order to make the most of a credit card, you need to opt for the right card which suits your spending pattern, lifestyle and needs. Many banks offer credit cards that are tailored for diverse lifestyle needs. Choose a credit card that suits your lifestyle and offers you the maximum rewards.
 
For example, if you are a frequent flyer, opt for a co-branded online travel agency / airline credit card. Such a card will make your travel smoother and more comfortable, with benefits like free lounge access at airports, priority boarding, etc. For example, HDFC Diners Club Black offers unlimited lounge access, six free golf games per quarter and up to Rs15,000 in bonuses. Consider this, if you are a high spender and your income is at least Rs21 lakh per annum.
 
Vijaya Rupay (a no fee, global card) offers 12 lounge visits free and 5% cash-back on dining and utilities. This is best, if you are a low spender. 
 
The Air India SBI Signature card offers eight domestic visits/year and Rs11,250 in bonuses. Consider this if you fly Air India.
 
The ICICI Sapphiro Amex card offers four quarterly domestic lounge visits. The US$99 annual membership fee for Dreamfolks DragonPass is complimentary. Consider this card, if you are not a high spender but interested in hotel perks.
 
You also stand to earn miles that you can convert to free flight or complimentary nights at star hotels. Citi Prestige offers priority pass membership, buy four nights, get one hotel night free. Consider this, if you have Citigold Private status and you are a high spender.
 
Axis Bank's Pride Signature Credit Card is the best travel rewards card with an easily achievable annual fee waiver. The first year is free but you would technically be charged Rs500 in the following years if your annual spend is less than Rs40,000. The bulk of the Card's value comes from general spend, with great 1.6% cash-back on all transactions except fuel.
 
If you are given to entertaining, eating out or socialising regularly, opting for a card that offers a better dining experience, greater rewards and discounts at restaurants. HDFC cards have some great offers on Good Food Trail. HSBC cards also have good dining offers. Check for restaurant offers on ICICI cards.
 
ICICI Bank Platinum Chip card offers 15% savings on dining at over 2,500 restaurants. You earn two PAYBACK points on every Rs100 spent for all retail purchases except fuel and one PAYBACK point on every Rs100 spent on utilities and insurance categories and there is a 1% fuel surcharge waiver on fuel transactions of maximum Rs4,000 at HPCL petrol pumps.
 
If you shop only at Shopper’s Stop, then a co-branded Shopper’s Stop credit card might be useful for you. (First Citizen Citi card).
 
If you have a very basic lifestyle, then a cash-back or points card might be best for you. The Standard Chartered Super Value Titanium Credit Card is a great option for those seeking a cash-back card with elevated rates for utilities. It offers 5% cash-back on utility, phone and fuel bills (subject to Rs750 minimum transaction, with a maximum cash-back of Rs100 per month).  
 
The Kotak Mahindra Essentia Platinum Card is a great option for individuals looking to earn cash-back on grocery and online shopping. Potential cardholders will earn a rewards rate of 10% (10 Saving Points per Rs100 spent; 1 point = Re1). To receive this high rate, the minimum transaction has to be Rs1,500 and monthly points are capped at 500 points across grocery and retail spending combined.
 
If you are a person who spends more on entertainment activities, such as movies and clubs, then an entertainment credit card would suit more than the other categories. Kotak Delight Platinum Card is a great option for those looking to use on dining and entertainment spending. The Card offers the best-in-market 10% cash-back on dining and entertainment categories (maximum Rs4,000 per transaction, maximum Rs600 cash-back per month). But, to redeem these rewards, you need to be a high spender, as the redemption process requires cardholders to spend Rs10,000 each month on categories other than dining and entertainment (no other category earns rewards for this card). However, there is an anniversary bonus of Rs750 (or four free PVR tickets) on spending Rs1,25,000 each month. 
 
If you are looking for a credit card that offers something across all categories, HDFC Regalia is a good option. It has great offers on dining/ travel, offers a good rewards programme and has comprehensive protection plan. 
 
Credit Card Rewards
There are three main categories of rewards: miles, points and cash-back. Depending on the category, cards accrue rewards that can be applied as statement credits (cash-back), as reward points or as miles. Depending on your interests or how you tend to spend, one of these three types of rewards may suit you best. 
 
But suppose you frequently make  online / retail purchases but travel very rarely. In this scenario, if you take an air miles credit card that gives minimal miles on retail purchases and bonus points on flight bookings, then your purchases would not be efficiently rewarded. More likely, your air miles won’t accumulate enough to be able to redeem for a free airline ticket, since your points will start to expire after two years. Hence, you can never truly maximise your spend or have the credit card work for you.
 
Reward points are the most critical factor in this decision-making. Reward points are an added incentive to use your credit card. ICICI Bank Sapphiro American Express Credit Card has a rewards rate of 1.5% (six points per Rs100, one reward point = Rs0.25) on overseas spending, 0.75% (three points per Rs100, 1 reward point = Rs0.25) on general spending and 0.25% (one point per Rs100, one reward point = Rs0.25) on utility bill and insurance spending.
 
Typically, every reward point carries a value of 25 paise to 50 paise. Check the reward catalogue from the bank’s portal and find the market value of the items in the reward catalogue and the points required for redemption. For example, if a Wonderchef waffle-maker costs Rs2,500 and you require 6,000 reward points to redeem, then the value of each reward point is 41 paise
 
Generally, rewards are not as accessible as you may think. Often cash-back rewards are awarded quickly and redeemed (thus, more useful to people looking for quick redemption on their rewards). But redeeming miles may take up to a month to receive, due to longer processing time, making it less attractive for those who want faster rewards; but it remains attractive for those looking for mile rewards. 
 
Credit Card Category and Offers
 
Shopping Credit Card: This type of credit card is targeted at customers who spend more money for purchases such as clothes, jewels, groceries, gadgets, etc. There are also special credit cards designed for online shopping which offer special rebates on some e-commerce portals. This type of credit card would be best suited for housewives who have to manage all their grocery and other retail shopping.
 
Travel Credit Card: This card suits people who travel frequently and those who need to book flight tickets, make hotel bookings and need cash for international spends. Travel credit cards enable cardholders to do all of this and pay later. Most of these would also offer a limited number of complimentary lounge access at airports. The reward points are an added benefit.
 
Lifestyle Credit Card: These are premium credit cards which are best suited for the elite population that indulges in dining out, makes higher purchases, etc. These credit cards offer greater number of discounts, higher reward points and free concierge services. Since these cards offer more benefits, the annual fee is also higher compared to other credit cards. (American Express Everyday Spend Gold Credit Card, Citi Premier Miles Credit Card).
 
Reward Points Credit Card: Reward points are one of the attractive features that credit cards offer and an increasing number of people use credits cards solely for this reason. Many credit card providers have introduced credit cards which help you earn more reward points that can be redeemed against various gift items. (Standard Chartered Platinum Rewards Credit Card, HSBC Visa Platinum Credit Card, HDFC Bank Regalia Credit Card).
 
Cash-back Credit Card: Cash-back cards are similar to reward points credit cards and help you save on all your purchases. One gets a certain percentage of cash-back on various spends such as dining, ticket booking, hotel booking, etc. Additionally, one can also use the cash-back points to cut down the monthly credit card bill payment. (HSBC Cash-back Credit Card, Standard Chartered Ultimate card, IndusInd Iconia American Express card).
 
Fuel Credit Card: If you own a vehicle, you must be shelling out a neat sum every month for fuel expenses. Some credit card companies have created fuel credit cards that help you save more on fuel expenses. One can get up to 3% fuel surcharge waiver on such card. (Indian Oil HDFC Bank Credit Card, BPCL SBI card, ICICI Bank HPCL card).
 
Women Credit Cards: Realising the importance of providing financial freedom to women, some credit card companies have come up with exclusive credit cards for women. Women, who love shopping, can make use of this credit card to obtain offers and discounts. (HDFC Bank Solitaire, RBL SHOPRITE Credit Card, Citibank rewards credit card, ICICI Bank coral credit card).
 
Business Credit Card: Business entities spend a huge amount of money for business operations. Using a business credit card to make all business purchases, such as machinery, inventory, etc, can help earn reward points and cut down the expenses. The business credit card also helps keep track of all the expenses. (SBI Platinum Corporate credit card, Citibank corporate credit card, HDFC Bank Moneyback card, ICICI Corporate credit card, Axis Bank business credit card).
 
Secured Credit Card: Individuals need to have a good income and credit score to get approved for a credit card. But people, who cannot get an approval, can opt for a secured credit card, if they have a fixed deposit (FD). The credit limit on this type of credit card is usually provided up to 80% of the FD amount. (BOB financial prime credit card, Axis Bank Insta Easy Credit card, Kotak Silk Inspire credit card).
 
Student Credit Cards: These are specially designed for students who are pursuing their post-graduation. The eligibility criteria for this card is determined, based on father’s or guardian’s income. Students can use such cards to purchase laptop, gadgets, stationary items, etc. (SBI Student Plus Advantage Credit Card, ICICI Bank student travel card, HDFC Bank ForexPlus card).
 
After viewing all the available offers, you must carefully read all the terms & conditions related to those offers. Check the validity of each offer while choosing a credit card.
 
Joining Bonuses: Most credit cards, in the premium and travel segments, offer attractive joining bonuses or welcome benefits in the form of free vouchers and additional bonus reward points. You can compare the joining bonuses among similar cards before selecting one particular option.
 
Finance Charge: Credit card companies levy finance charges on non-payment or part-payment of outstanding balance by the due date and on cash withdrawals. This charge is levied right from the date of the transaction until the repayment of the entire outstanding. The finance charge can vary from 30%–42% per annum, depending on your card type. Though you should always pay your entire outstanding before the due date, you should still consider these charges when applying for a credit card.
 
Credit Score: The approval of your credit card application primarily depends on your credit score, monthly income and occupation details. Every bank gives different weightage to these parameters. Generally, people with credit scores of 750 and above have higher chances of getting their credit card easily approved.
 
Annual Fee and Other Charges
If you are choosing a credit card for the first time in India, then you need to check the annual fees and renewal fees of the credit card. Check the waiving off criteria of the annual and renewal fees. Typically, waiving off criteria depend on your expenditure pattern. So, analysing your expenses and then choosing a credit card would work best for you.
 
You need to thoroughly go through the other charges too.
  • Late Payment Fees
  • Cash Advance Fees
  • Rate of Interest Charged on the Balance Amount
  • GST
  • Foreign Currency Mark-up Fees
  • Cash Withdrawal Charges
  • Mobile Alert Charges
  • Balance Enquiry Charges
  • Duplicate Statement Charges
 
Credit Limit 
All credit cards offer different credit limits and the credit limit of an individual is determined based on the income. Hence, before taking a credit card for the first time, you must contact the bank’s representative and ask the maximum credit limit that you can get according to your salary or income.
 
Try not to opt for co-branded credit cards, since all the benefits of the credit card are then associated with respect to the partnered brand. (HSBC makemytrip credit card). Opt for these cards only if you have a very high level of engagement with the partnered brand.
 
Hence, you need to analyse your specific requirement for a credit card and then check the credit card’s specifications. In the card’s specifications, check the fees, charges, payment options and all the available offers on the card and make an informed decision based on all these factors. Ideally, have at least two credit cards (with different billing cycles) one Visa and one MasterCard.
 
Comments
gayono8344
5 months ago
I am reading your article and I would like to tell you that the quality of the blog is fab. Thanks a lot for providing this informative blog. It is very important to pick the right credit card. Here, I recommend you the REDcard Credit Card .
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