💳 Getting your first credit card?
There’s just something about credit cards that makes you feel very adult - and why wouldn’t it? It’s a huge milestone 👑! Credit cards are an essential part of your financial journey, and if used prudently - can have unlimited benefits.
So you want to pick a credit card but not sure where to start? Let us help:
# 1️⃣: Eligibility - Whenever you’re choosing a credit card, your eligibility for the card will be determined by a variety of factors - such as age, income and credit score. 🎰 What is ‘credit score’ you ask? It’s a number between 300-900 that signifies your creditworthiness. Basically, it evaluates how likely you are to pay back your dues on time. The higher the score, the better - it will also help in getting loans at favourable interest rates. If you’ve never had a card or loans before, you might not have a credit score. Credit score will also determine the credit limit of your card - i.e. the maximum amount you can spend on your credit card (💡Tip: Don’t spend more than 30% of your credit limit per credit cycle, otherwise it will affect your score adversely).
P.S. If you want more information on credit score, check out the “Building your credit 101” Booster!
# 2️⃣: Rewards - This is probably the most sought after benefit of credit cards 🎁. With every purchase, most cards will enable certain rewards and cashbacks that you can use to your advantage. Different cards will have different benefits, so choose one that aligns most with your spending habits. For example, if you travel a lot - you might want a card that has great travel rewards, airport lounge access, air miles, overseas insurance covers, etc. If you intend to use the card to shop, you can opt for a card that can give you rewards on online spends, like on Amazon, Myntra, etc. You can also get rewards for everyday expenses such as grocery, fuel, dining, etc.
# 3️⃣: Fees and Interest Rate - Finally, you want to check for any associated fees. Many cards have joining and annual fees - especially ones that have great reward programs. For a first time card user, you can opt for cards that don’t have these fees. Always check for the interest rate as well 🔍- this is the rate which you will have to pay on your unpaid dues. As a thumb rule, ALWAYS strive to pay your credit bills on time and in full so these rates don’t affect you. If you pay the minimum amount due, you will owe interest on the balance! Credit card interest rates can go as high as 45% per annum, but won’t matter if you pay on time.
And that’s it! Simple, right? You can start with a beginner card that is easier to get, set spending limits, get comfortable and move your way up 🪜 to the more exclusive cards as you build your credit score.
Like everything in finance, getting a credit card is a very personal choice - but it’s definitely a smart way to spend ✅!