6 Features to Evaluate When Selecting a Credit Card
Updated on November 19, 20185 mins read
With all the schemes and offers available on credit cards, selecting the ‘right one’ is not an easy task. Apart from borrowing costs such as interest and annual fees, there are many salient features of credit cards that we might fail to consider before making a decision.
Here are a few vital features that you should consider before making the ‘right’ decision!
1. Reward Points:
‘Reward points’ is a non-monetary incentive provided by credit card companies to use your credit card more. This is one of the most crucial factors that decides which credit card you should apply for.
The value of a reward point can be found out by checking the market value of a certain product and the points required to redeem it. For example, A Sony TV is for Rs 50,000 and the reward points required to redeem it is 1,25,000 points. Thus, the value of one point will be Rs. 0.40.
The value of the reward points varies from each card. Generally, Gold, Platinum and privileged credit cards give you more reward points than normal cards. For example, A Citibank Rewards Card gives you 1 point on every Rs 125 spent. Whereas a Manhattan Platinum Credit Card by Standard Chartered Bank offers 5 reward points for every Rs 100 spent.
However it is not possible to obtain a privileged credit card as a specific income criterion is required.
2. Cashback Credit Cards:
A Cashback reward program is an incentive program operated by credit card companies where a percentage of the amount spent is paid back to the card holder in the form of monetary benefit. Usually the monetary incentive is received in two ways; either the credit card account is debited or the holder is paid the amount separately. The card holder generally receives 0.5-2% of his net expenditure (expenditure minus refunds) in the year, depending on the incentive scheme. Usually, you get cash back on individual transactions. The higher the transaction, the greater is the cash benefit.
One of the reasons why cashback credit cards are not used much in India is because the terms and conditions that come with cash back offers. Cashback offers might have some conditions such as:
‘Spend upto Rs. 5000 in Restaurant X and avail a cashback of 10%.’
‘Cashback is available only on telecom + dining + gas utilities.’
Cashback credit cards have high renewal fees. Hence, in many cases the cost may weigh out the cash benefit received from the card. It is important to take your spending patterns into consideration before taking a cashback credit card.
3. Co-Branded Credit Cards:
Credit Cards that are associated with a certain brand are called Co-Branded Cards. Cards such as ICICI Big bazaar Credit Card, Jet Airways ICICI Bank Sapphiro Credit Card, SBI Railway Card are Co-Branded Credit Cards. These cards provide attractive deals and offers on the associated brand’s products.
For Example, Jet Airways ICICI Sapphiro Bank Credit Card provides these offers:
Bonus of 5000 Jet privilege miles on every renewal of the card.
5% discount on all domestic air tickets.
10 kg additional baggage allowance on all domestic flights, etc.
These cards can be advantageous to a consumer who is loyal to a certain brand, as they can make the most out of the offers available on the card. At the same time, this can be a major disadvantage too.
For example, the ICICI Big Bazaar Credit Card gives you 6 reward points on a purchase of Rs 100 in Big Bazaar. While, a purchase from any other brand except Big Bazaar will give you only 1 reward point for a purchase of Rs 200. This is a great offer for customers who buy daily requirements from Big Bazaar only. On the other hand, it can be disadvantageous as an all purpose credit card.
Co-Branded Credit Cards may have higher annual fees and interest rates than normal credit cards. You should weigh out the pros and cons before applying for a co-branded credit card. Before applying for co-branded credit cards, you should check the terms and conditions too. It is possible that the offers on these cards can be applicable only on a few selected scenarios.
Another mistake that people make is that they take many co-branded credit cards. Possessing multiple cards might exhibit credit hungry behaviour. It is advisable to avoid such a situation as it may affect your credit score negatively.
4. VISA/ MasterCard Payment System:
It is important to know that VISA, MasterCard, American Express, Maestro etc, do not issue cards. They are network systems that process payments between banks and merchants for purchases made with cards.
VISA and MasterCard are accepted globally, compared to other payment systems. There aren’t many differences between these payment systems.
VISA and MasterCard both offer basic benefits such as: auto rental collision damage coverage, extended purchases warranties, unauthorized purchase coverage, emergency assistance and urgent card replacement. The only notable difference that MasterCard offers over VISA is price protection. If you buy an item with a MasterCard and the price is reduced within 60 days, MasterCard will cover the difference, though there are exclusions.
When it comes to these differences, it does not really matter a lot. The offers and benefits provided by the banks is what matters really matters.
5. Flexible Billing Date:
It is essential to know the payment date of your credit card bills. The billing date generally is two weeks before the payment date. You can choose your billing date at your own convenience. It is smart to fix your billing date according to your spending pattern and your salary. With regard to changing your billing date, HDFC is quite strict while Standard Chartered is pretty flexible.
6. Easy Payment Options:
Most banks provide an option to pay bills through net banking and NEFT. This might not be convenient for everybody. If you prefer dropping a cheque in a box in the nearby ATM, ask the bank if it is possible. At the same time, a few banks might not offer internet banking facilities. Thus it is important to check the mode of payment before applying for a card.
When it comes to selecting the right credit, there is no ‘correct’ formula. You will have to consider your expenditure patterns, income and exclusive features available that will help you make the right decision. You cannot expect to have all the best features in your credit card. It is advisable to keep at least 2 credit cards. This way you can make the most out of your credit cards. But, make sure to not possess too many credit cards as it can affect your credit score.
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