Credit cards can make life much easier and simpler. Understanding the basics of credit cards will help you save time and effort. Plastic money can do so much more than enable you to make big purchases. They also help you build a CIBIL score to get loans quickly. Further, they can offer tons of benefits, like reward points and cashbacks on various pleasures like dining, travel, and shopping.
In India, 57.4 million credit cards were operational as of April 2020, according to the Reserve Bank of India (RBI). This shows that the high penetration rate of this financial tool in the country. But, despite its growing popularity or regardless of how tech savvy you are, there could be things you may not know about plastic money.
1. Types of Credit Cards
You can choose from a variety of cards depending on your spending habit or lifestyle choices. For instance,
- Classic Cards offer 10X rewards (1 reward = ₹0.25) on purchases above ₹20,000 and 6X rewards on online purchases and 3X rewards on offline spends.
- Select Cards offer the same deals along with a lower forex mark-up at 1.99%, domestic and lounge access, and travel insurance.
- Wealth Cards are complimentary for life and allow an additional 10X rewards on your birthday spends along with all benefits mentioned above.
2. Interest Rates
One must know the credit card interest rates capped on your card. This way you will know the extra amount you have to pay per month in case you are incapable of clearing the bill. The fee is usually added to your outstanding debt. Banks are likely to take your payment history, economic conditions, current debt loads, and income assets into account too. Work with a bank that offers the lowest rates starting at 9% annually.
3. Avoidable Credit Card Fees
Multiple credit card charges can be avoided by careful planning. These include late fee, over-limit fee, and foreign transaction fee. In fact, if you do not opt for cash advances or balance transfers, charges associated with these services will not be levied. You can choose options that allow interest-free cash withdrawals for added benefits.
4. Dip on Credit Score
The score can be affected if the credit utilisation ratio is higher than normal. For example, if your limit is ₹10,000 and your current balance is ₹9500, it could ruin your score. Therefore, plan to use not more than 30% of your limit. This is a smart way to keep the numbers steady and make the most of the subsequent advantages.
5. Purchase Protection
This allows buyers to file a complaint to fully reimburse, replace or repair any damaged item. You can raise the issue online or via a phone call. Make sure to understand the policies on different types of credit cards from the associated bank.
Compare credit cards and pick the one that comes with great reward and cashback plans. This can make the experience even more enjoyable. Further, make sure to know how to protect your card from being misused.