What I believe is, a Credit Card is just like one of your very good friends who always come forward to save you from any embarrassing situation where you run out of cash to make any payments. Not only that, but also a credit card does not let you to miss any opportunities available for a limited period for which due to short of cash you might get estranged from that. However you need to be cautious that the kind of leniency this friend shows while helping you, but at the same time it will be very strict while taking the dues back.
Do you know a proper usage of credit card increases your credit score which eventually helps you getting loan faster? But on the other hand it can also plummet your score to dark depths if you are not careful. Thus you need to know various things about credit cards such as their usage, charge structures, limitations etc. With the rise in standard of living, banks are coming out with increasing number of cards offering a number of innovative features. It is very important for you to choose the right credit card so that you can get the best out of it.
PRIMARY INVESTIGATION BEFORE APPLYING A CREDIT CARD;
Today in the competitive market credit card providers offer you the card with best feature, but remember nothing comes for free. So you need to get the answers for the below questions first then proceed for applying a credit card.
Is there any Annual Maintenance or Joining Fee?
First figure out what will be the frequency or volume of usage. Just do not jump into what the representative is saying. Many banks offer a minimum entry fee which they claim to refund you based on your purchases for first few months. What if you do not reach to the limit of volume to get the refund or just to get the joining fee back you might get into unwanted purchases then? So it’s better to look back your past spending trends and compare the offer. If it’s really worth then opt or else reject.
Even it also matters a lot if your usages are not much but you keep on paying annual fee for the same. In this case, it makes more sense to opt for the card that doesn’t have any such annual fees.
What are the Credit and Cash Limits?
If your spending is high in term of volume then choose a card which gives you sufficient credit limit. It is advisable not to cross more than 50% frequently out of the credit limit even if you make the due payment on time. Also you need to ensure you are using certain extent of the monthly income limit. Else this will negatively impact your credit score. The logic is very simple, loan provider may observe your spending habits which may depicts you already have high amount of spending commitment in a month then how will you manage new loans repayments.
It is always recommended not to withdraw cash on your credit card, but in case any such situation comes and you have to exercise this option then you must always take a look at the cash withdrawal limit available on the card. But don’t forget cash withdrawal charges and interest are much expensive than any personal loan.
What are the Interest Rates and Late Payment Charges?
This is one of the most important points that you need to check first. Situation might come where you miss to make full or part of the due payments and you carry forward such unpaid balances. So go with a card provider/bank charging lowest interest rate or late payment charges, as these extra costs can land you in debt crunch very easily.
Are these cards accepted with all Merchants?
It’s not just for the sake of taking a luxury Credit Card with lot of reward options, flexibilities in international transactions, but it should also work for your basic needs. As Visa and Mastercard are universally accepted, but Diners and American Express have limited acceptability. So first figure out what is your requirement.
As the saying goes “Look before you Leap”, and the same adage apply to you while you opt for a new credit card. A wrong selection of credit card which may not suit to your requirement is of no use. Sometime non usage of credit cards, bank has charged (fact shared by one of the readers) fees/penalty. I am always in favour of closing the credit cards which are not in use. For this you need to call the customer care of the respective banks/card providers. Remember! Any due amounts on such cards are not a good sign which certainly affect your CIBIL record. Here I suggest you to talk to the bank/card providers and prove your point. In case you fail to do so, you have to clear the dues before closing them.
Note the point here, I mentioned “clear the dues”, this doesn’t say bank gives you an option of “settlement” and you go for it. Whenever bank follow you for pending dues, but after continuous follow up when they don’t get the same then they provide user a settlement option where the user can pay some minimum payments and close the card. But this badly impact your profile as BANK send negative report to CIBIL stating it has been Settled, but Not Cleared.