Receiving your first credit card can be seen as a milestone in the journey towards financial independence, but it can feel overwhelming if you remain unsure about where to start. More than being a convenient way to make payments. A credit card serves as a tool that helps in building credit history and manage expenses, besides accessing certain rewards or benefits.
While taking a credit card, there are several factors, such as interest rates, eligibility, credit limit and security features, that need to be considered to make a beginner-friendly choice. Making the wrong decision by not understanding its terms and conditions can lead to unnecessary debt and hidden charges. A key here is to strike a balance between affordability and utility. This means, you pick a card that does not leave you overburdened with high fees.
How To Choose Your First Credit Card? 7 Key Factors Beginners Must Check
1. Know Annual Fees And Charges
While some cards are free, others come with an annual fee. A few of them even offer waivers if a certain amount is spend on annual basis. Beginners should ideally start by taking a low or zero annual fee card. A better understanding of the required spending compared with your budget helps in getting more benefits. It is advised to avoid overspending just to meet the target.
Also, keep a watch over late payment fees, cash withdrawal charges as well as foreign transaction fees.
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2. Interest Rates
Credit cards typically charge 30% to 42% annually if cardholders fail to make the full bill on time. Missing out on payments and carrying balances can damage your overall financial health and credit score. It is often stated that nearly 40% of first-time users are not fully aware of interest charges and late fees.
3. Base Conversion Rate
You get to earn points while spending through credit cards, which is called the base conversion rate. Cardholders must remain aware about each point's cash value that varies from one card to another. There can be chances where you get to earn higher value when redeeming even if you earn fewer points.
Also, cashback, reward points, discounts on shopping, dining, or travel are common perks that people get. Go for a card that perfectly aligns with your lifestyle.
4. Eligibility And Other Requirements
Banks set minimum income levels for entry-level cards. To avoid rejection, ensure that you meet the eligibility criteria before applying, otherwise this can negatively impact your credit score.
Also, starting with your salary account improves approval changes and even helps in building a credit record for future applications.
5. Credit Limit
Beginners are often advised to start with a moderate limit, which is well enough to cover the monthly expenses and not so high that it tempts overspending.
6. Milestone benefits
At times, cards give extra points or vouchers when people cross spending thresholds. Try to choose cards where such milestones feel achievable without forcing you to make unnecessary purchases.
7. Customer Service
A responsive customer support team can save you from stress at the time of disputes or emergencies. Do check if the bank is offering 24/7 helplines, mobile app support, and easy grievance redressal.
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