When it comes to managing our finances, having more options is always a plus. Credit cards have revolutionized the way we spend money, making our lives more convenient than ever before. But with great power comes great responsibility, and it’s essential to find a credit card that matches our unique spending habits to avoid the risk of overspending.
With the right credit card in hand, we can reap the benefits of rewards, cashback, and other perks while maintaining our financial stability. So, don’t be afraid to explore your options and find the perfect credit card that fits your lifestyle and budget!
Types of Credit Cards
To help you make the right choice, banks, and financial institutions offer the option of choosing your credit card depending on your needs so that you don’t overspend and fall prey to debt traps. When you decide to buy yourself a credit card, you may have to choose one among the following:
- Basic Credit Card – These credit cards are ideal for beginners. If you are new and only wish to try how credit cards work, then you can go for a basic credit card. In this card, you will get a small limit depending on your monthly income, such that you don’t fall into any sort of debt trap as you use your new credit card. It must be noted that basic credit cards do not offer any additional benefits on the amount spent.
- Virtual/Digital Credit Card – A virtual credit card is an add-on VISA credit card that is issued on a user’s primary credit card. Users can only use the virtual card online, meaning that all the credit card details such as the card number, expiry date, CVV, etc. are visible online. Paytm offers a co-branded digital credit card in collaboration with HDFC Bank.
- Zero Annual Fee credit card – These credit cards are the ones that do not charge any annual fee. This card is suitable for individuals who do not make much use of their credit cards and need very few additional benefits on their credit cards.
- Travel credit card – These cards are beneficial for travelers. Every time that you use a travel credit card to make payment for airline bookings, hotel bookings, etc., you earn rewards points. These points can further be redeemed to make new bookings for travel.
- Fuel credit card – These credit cards are majorly beneficial for transporters. Fuel credit cards help you avail fuel surcharge waivers, and save on your fuel expenses by reducing the daily transportation costs. You can also earn reward points and use them to make substantial savings on your fuel expenses all through the year.
- Shopping credit card – Shopping credit cards let you shop at various stores or e-commerce websites and offer you discounts in the form of cashback, reward points, etc. Using this card, you can get various cashback, discounted vouchers, etc. on your future purchases.
- Reward credit card – Reward credit cards offer huge reward points on all your spending. These cards offer accelerated reward points on certain specific transactions. The bonus points hence earned can be used to get discounts on the next purchases. You can also redeem these bonus points to reduce your monthly credit card bills.
- Secured credit card – Secured credit cards allow you to benefit from attractive interest rates against fixed deposits. Using this type of credit card will help you increase your credit score if used carefully.
- Low-interest credit card – Low-interest credit cards are the ones that offer a comparatively lower interest rate than the other cards of a similar category.
- Balance transfer credit card – A balance transfer credit card is one that allows you to transfer a balance at a low-interest rate for a specific period of time.
- Cashback credit card – Cashback credit cards are the ones that offer a specific amount of cashback on purchases made using the credit card. However, there may be certain conditions on the type of transactions that are eligible for cashback.
- Entertainment credit card – Entertainment credit cards are the ones that offer discounts and deals only on purchases that are related to entertainment such as booking movie or concert tickets, amusement park tickets, etc.
- Lifestyle credit card – Lifestyle credit cards are suitable for the ones who make spends on lifestyle activities such as premier screenings, night clubs, fashion shows, etc.
- Co-branded credit card – Co-branded credit cards are the ones that are offered as a result of a tie-up between the card’s issuing bank and a particular brand. You get special discounts on purchases made on a specific brand using a co-branded credit card.
- Business credit card – Business credit cards are ideal for businessmen. These cards help in ensuring that business and personal transactions are separate. It is important to note that to get a business credit card, you must have a high credit score.
- Prepaid credit card – Prepaid credit cards are the ones that need you to have a prepaid balance on your credit card before you use it. The amount for all the transactions hence made will be deducted from the credit card’s balance. Also, there is no additional charge or criteria for minimum payment on this type of credit card.
- Student credit card – Student credit cards are meant for college students. Having a low-interest rate, these credit cards help students manage their finances and credits better. The applicant must be a college student, above 18 years of age to be eligible for this type of credit card.
- Premium credit card – Premium credit cards are meant for only a few people. These cards provide access to a few golf clubs, airport lounges, concierge services, insurance, etc. Upon proper usage, these cards offer coupons for complimentary travel and/or hotel accommodations. It must be noted that there is a strict eligibility criteria for a premium credit card.
How to Choose the Best Credit Card?
Here is how to choose the best credit card:
- Check Your Credit: Before choosing a credit card, check your credit score. The better your score, the better perks you can get. You can improve your score by paying bills on time and reducing credit utilization.
- Goals: Decide what you want to achieve with your credit card. Do you want to build credit or earn travel rewards? This will help you choose the best card for your needs.
- Debt: If you have high-interest debt, consider a balance transfer card to consolidate it. If you are debt-free, choose a card with benefits like reward points or cash back.
- Rewards Program: If you want to earn rewards, choose a card with the best reward program. Look for cash back, travel rewards, or points you can convert to air miles or hotel bookings.
- Fees and Charges: Compare cards based on their fees and costs. Look at interest rates, application fees, annual fees, and late fees to make the best choice.
Factors to Keep in Mind Before Applying for a Credit Card
You must consider the following important factors before applying for a credit card:
- Annual fee – Every credit card has an annual maintenance fee that is applicable for one year. However, there are a few cards that are offered for free, these cards rebate your first year’s annual maintenance fee
- Interest on credited amount – If you fail to repay the amount to your bank during the grace period, you will have to pay interest on the credited amount. This interest varies from 1.5% to 3.5% monthly, depending upon bank to bank
- Additional expenses – Various credit card companies may also levy certain additional expenses that might not be highlighted in the beginning. However, it is important to keep a detailed check on these added expenses before buying a credit card. Such expenses include joining charges, the cost of overseas transactions, cash withdrawal interest, fees for overusing the credit limit, fees for late payment, fees for card replacement, surcharges, etc.
- Special benefits – As you decide on the credit card of your choice, you must also check the additional benefits offered by the credit card company. These benefits may include cashback on first withdrawals or purchases, reward points, discount vouchers on various e-commerce sites or restaurants, etc.