Credit cards are a hugely popular financial tool in India; in FY 2022 alone, an enormous 73 million new issues were made. With more and more consumers preferring to go cashless while enjoying an elevated lifestyle, credit cards have become an essential part of the modern consumer’s financial toolkit.
Not only do they offer a secure mode of payment, but they also provide an assortment of additional benefits, such as attractive reward points, exciting cashback offers, and exclusive discounts on various purchases. Yet, behind these pocket-sized tools lies a complex world of facts and figures that every cardholder must understand.
Here are 10 critical facts about credit cards in India that you must know to unlock the full potential of this tool.
1. Different Cards for Different Needs
India’s credit card market is a mosaic of diversity, offering a card for nearly every lifestyle and necessity. From the jet-setter to the shopaholic, there is a plastic companion tailored to every consumer’s spending habits. So, consider your options carefully to select a card that aligns with your financial and lifestyle requirements.
2. Avoid ATM Withdrawals Using Credit Cards
While credit cards offer the convenience of ATM withdrawals, they typically come with high interest rates and additional transaction fees. Cardholders must only use this option as a last resort, instead use a debit card for ATM withdrawals to avoid accumulating high-interest debt.
3. Pre-approval Does Not Always Mean Approved
Being pre-approved for an online credit card does not guarantee final approval. It simply means you met a few basic criteria. Banks conduct a thorough evaluation of an individual’s credit history, financial stability, and repayment capacity before granting final approval.
4. Pay Your Bills on Time in Full
Paying only the minimum amount due may seem lucrative, but carrying forward your dues can attract high interest rates. Full and timely repayment of credit card bills not only helps in avoiding late payment fees and high-interest charges but also contributes to maintaining a positive credit history.
5. Your First Credit Card Affects Your Credit History
The way you manage your first credit card significantly impacts your credit history and credit score. Responsible usage and timely payments can lay a strong foundation for a healthy credit profile, while mismanagement can have adverse long-term consequences.
6. Credit Card Fees are Avoidable
While some credit cards come with annual fees and other charges, certain banks offer fee waivers or reduced fees based on factors such as spending behaviour and loyalty. Consider these conditions to select the right card for you.
7. Maintain a Healthy Credit Utilisation Rate
Credit utilisation rate is the amount of credit you use out of the total available limit. Keeping it within a reasonable range, ideally under 30%, indicates responsible credit management, helping you maintain a healthy credit score.
8. Opt for an EMI Option for Lower Interest Rates
When making big-ticket expenses, convert the amount into EMIs as they attract a lower rate of interest than standard credit card interest rates.
9. Enjoy Lower Interest Rates with a Balance Transfer
If you have accumulated debt on a high-interest card, consider a balance transfer to another card with a lower interest rate. This will help you manage debt comfortably and save on interest payments.
10. Review Your Credit Report Regularly to Identify Inconsistencies
Periodically reviewing your credit report helps identify any inaccuracies, errors, or fraudulent activities that may impact your credit score. Promptly addressing these issues ensures an accurate credit profile and guards you against potential financial setbacks.
Master the Essentials of Credit Cards in India
Understanding the crucial facts about credit cards in India is essential for practicing responsible financial management, and building a good credit score. Selecting the right card, paying bills on time, and understanding fees and interest rates will help you make the most of your credit card.
Most banks offer an online, paperless application process, making it easier to research and compare different cards. Keep these handy tips in mind before you apply online for a credit card to make an informed decision.