Applying for a credit card is a huge financial decision and a daunting task. One should already be aware of the workings and responsibilities of a credit card before applying because if used properly, it can prove to be a boon, but if used carelessly, it can lead you into debt, misery, and a low credit score. how to get a credit card online isn’t a tough question, but what to consider and how to use it comes with its own set of rules.
Credit card applications usually seem easy and quick, but always keep in mind that you are making an important financial decision, which is why a few things should be considered when applying for a credit card.
Things to consider:
- Choosing a credit card
There are hundreds of credit cards for you to choose from, but first, you have to analyze the purpose of your credit card. It can either be to shop online, to spread the cost of a purchase, or just to simply pay the bills.
You can also look at the kind of credit card; it can be secured or unsecured. Unsecured are the ones that are issued if you have a good credit history, whereas secured credit cards are issued if you have a damaged credit score.
If you are a beginner, you should get a credit card with a low annual fee. For example, RBL has beginner credit cards such as RBL Shoprite Credit Card, RBL Titanium Delight Credit Card, and many others.
- Important things to remember
- Interest Rate
In case of timely and full repayment of credit card bill, no interest will be charged, but if you carry the balance from one month to the next, you will be charged interest according to your Annual Percentage Rate (APR is the cost of borrowing money on the credit card) which varies from 30-40% per annum.
Fees include joining fees, annual fees, foreign transaction fees, over-limit fees, transfer fees, and more. As an applicant, you should always compare the fees on various credit cards before you get burdened with them.
As long as the card offers other valuable benefits, the fees can be worth it, and the issuer must have it prominently displayed with all the other credit card information.
- Grace Period
The grace period refers to the timeline in which the borrower has to pay the full amount of the credit card bill to avoid the interest charges. The timeline starts from the end of the billing cycle to the next payment due date. The grace period generally varies from 20-30 days, and if you fail to make repayment during this period, interest will be accrued on the balance amount.
- Penalty on Late Payment
In case you miss out on repaying your credit card bill on the payment due date, a penalty fee will be charged by your creditor which can damage your credit score and credit history.
- Comparison of Credit Cards
Almost all banking or financial institutions provide a platform for you to compare credit cards on the basis of fees, interest rates, reward programs, and much more. This will help you to figure out which card suits your requirements and lifestyle the best. For example, RBL has a very simplified platform to compare credit cards, which helps you in choosing the right one.
- Documents Required for Applying for a Credit Card and Eligibility
Every bank and financial institution usually has a generic set of documents required for a credit card as well as the eligibility criteria.
For example, for RBL, the following are the documents required for credit card application:
- An address proof
- An identity proof
- PAN card
- Proof of Income
- 2 Passport size pictures
RBL Eligibility Criteria is:
- The minimum age of the applicant should be 21 years to a maximum of 65 years
- Minimum monthly income must be Rs. 25,000
- Resident of India
- Add on cardholder’s age must be minimum of 18 years
- Balancing your Credit Utilization Ratio
Irrespective of your credit limit, you should have a significant check on the amount that is being spent from the credit card, as the credit card utilization ratio also affects your credit health. In case you have utilized 30-40% of your credit limit, your credit score will decrease, as it becomes a risk for the creditor in terms of repayment.
- Credit Score
A credit card defines your financial management, which is why credit cards have a huge impact on your credit score. That’s why exceeding your credit utilization ratio or missing out on your payment due date reflects poorly on your credit report.
A credit card does not only take care of your requirements, but also is a dependable financial instrument in case of any emergency, which is why the applicant needs to go through the terms and conditions, and repay the creditor on time to maintain their credit health. Understanding the odds and possibilities of a credit card can help the applicant to save money and reap the benefits of credit cards at the same time.