Credit cards are getting an interesting to own day by day due to the number of offers that it gives on shopping. Especially in the world of e-commerce. We are going to discuss the things that you should take care and know before getting the first credit card. 

Getting the First Credit Card

If you have a made a decision of getting a credit card, or if you are at the end of a sales chase by an executive to get this amazing new credit card, you should check with the basics of getting the first card. It includes what are the common behaviors of credit card holders and things that you should look at to avoid making a huge debt or loss of money over a period of time. 

Understanding the card

Credit card is like a quick loan card, that can give you access to use money at any time anywhere. In some of the cards, they allow you to use it without any costs for a few numbers of days. One thing that needs to be understood that with loan comes an interest. Credit cards do come with interest rates, in most of the cases, the interest rate is way much higher than most types of secured and unsecured loans. 

Then Why Credit Card?

A credit card might have its cons, but if you use it rightly, there are ways you can save a lot of money. In fact, it allows you protection for the liquid cash. The reward points and offers make it worth having it. Also, the credit card can be kept as a credit back up in the time of emergency.

Read: The best ways to use a credit card to save and make money.

Not only that, if you have a strong credit history, which includes timely payment. If the credit history is good, the lenders trust you and you can avail loans easily because of the track record and credit usage behavior.

Basic things to know:

Interest Rate

This is a single factor that can affect the experience with the credit card. Know the interest rate of the credit card. Also, know if the interest rate increase if the payment is missed. You should know what is the period where the interest rate is waved off. (The time where you can use the credit without surcharges/or interest). 

Ideally, the credit cards can have an interest rate from 18% to 36%. It depends on the issuer of the card and the type of the card.

Research and choose the best card that works for you.

Credit Limit & Utilisation

Depending on your income and history of credit (If you have had any consumer loans or any other type of loans) the issuer will set a credit limit for the user. In India, most of the credit cards can get a basic limit of 15000-25000 and the limit can go up to 2-5 Lakhs depending on the profile of the user. 

The issuer might give you a credit based on fixed deposit, income profile or from your existing banking transactions.

It is ideally in the best of interest of an individual not to use the credit limit to 100%. Most of the individuals might have a habit to use the credit card to its full limit. This might affect adversely on the credit score. Best to use it well below the credit limit.

Terms & Conditions

The * is undoubtedly the most powerful tool. It is important to know all the terms and conditions of the credit card. It might take time, but it is worth every penny to read all the terms and conditions before availing your card. Clear doubts if you have any related to your card.

If you can’t read the complete documentation, you should at least look at the following pointers:

Surcharges: Check for when, where and on which products there will be a surcharge

Currency Exchange: It might be fancy to buy an electronic in a non-native currency, but it will attract transaction cost. Know the percentage at which it will be charged

Late Payment Fees: You should always pay your bills on time but in unseen circumstances, if the bill is delayed, it is good to know the amount that you need to pay extra. Also, know if there are changes in interest rate post the extended period.

Billing Cycle: Know the billing cycle of the card, so that you can plan your transactions accordingly.
Annual Charges: Most of the cards come with annual membership fees. Some cards can wave off the membership fees post the use of the card. Check this section of the terms clearly.

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Should I use cash on the credit card?

Mathematically the answer is NO!

Why? Because you start with 2-4% of transaction charge. It might depend from card to card. On top of it, you will be charged an interest rate on the cash you withdraw.

To add to it, usually, you won’t get good offers, cash-backs for the cash you withdraw from the ATM. It is good to swipe it at locations, website, or retail outlets where you might get a good return.

Though, if you want to use it, you should payback quickly. Secondly, the cash limit of the credit card can be different than the total limit of the credit card. It is ideally, 10-30% of the total card limit.

Shopping Style & Use of Features

It is said that credit card influences shopping. Most of them find easier to pay via credit card which might result in spends. It is very important to keep a track on the type of spends you do via the credit card.

People using credit card have also talked about experiences where they have indulged into impulsive shopping.

The best way is to select a card, that suits your shopping style or use. There are cards that give great offers on retail shopping, fuel or air travels. It is not limited to these services, but there are many different cards, you can get a piece of detailed information from the issuer of the card.

Avoid Impulsive Shopping

Paying off the debt

The credit card payments should be on time. The debt on credit card can have a snowballing effect much faster than we realize it. It is always good to check our monthly statement and see the spends, interest rates, taxes, and other charges that are levied. 

Again, as the credit card is interest rate higher than most of the other types of loan. It is good to pay it off as early as possible.

To keep a note, no saving instrument with lesser risk gives you a return high as the credit card interest rate. So, think of clearing the debt before anything else. 

Minimum Due

Never limit the amount you pay back. It is always good that you pay the amount in full. If that is not possible, try to pay more than the minimum due. You can end up saving a lot of money on the interest.

Pay back more for savings.

The better side

Now, that we have looked where things might go wrong for the first time credit card user. I would like to also say that there is a better side for disciplined users. As said earlier, you can save a lot of money by using the card. The idea is to be disciplined with the expenses and repayment. 

We wish you a happy credit card usage, make the most of your card. If you have any queries, please do comment below.

This article was inspired by questions on Quora: You can find the question here, you can also find some really good answers here.

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Another engineer turned dream chaser. Yet, spends time watching videos on social media. At "The Must Read" takes care of strategic operations.

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