What You Should Know Before Getting Your First Credit Card?
Getting a credit card is a huge milestone to achieve. It enables you to manage your finances well if you use them wisely. You can use your credit limit to make purchases without worrying about paging interest. However, be wary of the terms and conditions associated with it. Credit cards in India come with numerous benefits, but if not utilized judiciously, you will have a huge financial burden to bear.
If you are applying for your first credit card, you need to know the following things to help you cautiously towards your credit card journey:
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Make sure that you have a stable income
Your income is a crucial factor based on which your eligibility for a credit cards is determined. It shows whether or not you earn enough to repay your credit card bills on time and in full. Not having a regular income may lead to a situation where you may not be able to pay your bill on time.
If you miss your credit card bill payments, you will have to incur interest charges and other penalties, which hamper your financial status and harm your credit score. So, apply for a credit card only if you have a stable and regular income.
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Maintain a good credit score
Your credit card is one of the best ways to improve your credit score. Make sure to pay your credit card bills before the last date. Do not spend more than 60% of your credit card limit unless necessary. Paying your credit card’s outstanding balance on time reflects positively on your credit score. Once you have an excellent credit score, you can apply for the best credit cards in India that come with rich rewards and other benefits. Or, you apply for loans to cater to your big-ticket purchases.
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Keep your credit limit low
When you apply for your first credit cards, your issuing bank assigns you a low credit limit to justify the risks involved. Once you learn how to manage your credit card and pay your credit cards bills on time and in full, your credit limit will increase automatically. Also, your credit limit depends on your income. If you have a high regular income, your credit limit will increase based.
However, having a high credit limit does not mean that you should spend it right away. Utilizing more than 60% of your credit limit reflects poorly on your credit score. So, keep your credit limit low and ensure to never spend over your limit, or else, you will have to bear over-limit fees.
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Thoroughly read the terms and conditions of your credit card
When you apply for credit cards in India, you must thoroughly go through the terms and conditions of your agreement. It may contain processing fees, interest charges, interest-free periods, etc. Make sure that you read them and agree with them before signing any document. If you need assistance, you can contact your bank, and a representative shall offer clarification on your credit card’s terms and conditions.
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Do not apply for the best credit cards
As a newcomer to credit cards, you may not qualify to get the best credit cards in India – the ones that come with reward programs, cashback, bonuses, big sign-ups, and 0% interest periods. These high-end credit cards are available only to customers with excellent credit scores. The minimum requirement to get such a credit cards is 750.
So, you will have to start with credit cards in India that do not offer any benefits. They are for people with no or low credit scores. However, they come with decent rewards and no annual fee. Such credit cards are known as student credit cards, secured credit cards, etc.
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Know all the hidden expenses
There are several hidden expenses associated with your credit card. For instance, you may have to pay additional charges on foreign transactions, cash advances, interest charges, etc. These charges may not be highlighted at the time of applying for a credit card. Not knowing about the hidden expenses may cause disappointment, and you may later feel exploited. So, while applying for your first credit card, ask your bank about all the expenses associated with the particular credit cards.
In short
Using a credit card is the best way to manage your finances, but if you are applying for the first time, you may make mistakes that could lead to situations where you will have to pay more than the amount borrowed. While using your first credit cards, make sure to always pay your credit card bills on time and in full to avoid interest charges and other penalties.