6 Tips for Buying Credit Card in India: Annual, Joining Fee, Interest Rate, Insurance

The usage of credit card in India is growing rapidly and more and more merchants are now accepting credit cards in order to increase customer satisfaction. However the penetration is still not that very deep. On the other hand card companies are trying to attract new customers through various marketing tactics but are selective too in offering the card since they first check whether the applicant is credit worthy or not. And with so many choices available, choosing a best credit card has become difficult for a customer.

So keeping this in mind here’s a credit card buying guide in India covering points to consider before buying a card so that they are not mislead or get confused:

  1. Interest rate: It is the most hated charge by any person who borrows money either in the form of credit card/loan/direct cash and loved by those who lend money. Credit card users are borrowers and card providers are lenders and what makes lenders earn profit is the interest rate. This rate is so high that if card is used unwisely, it will create financial havoc for you. So when you decide to buy a card, choose a one with lowest interest rate. Normally credit cards are bought so that person gets a grace period to pay off the money. But if you think that you are heavy spender and timely repayment would be difficult, then choose a card with lowest interest rate. Also remember that frequent late payment is an invitation to poor credit score which further adds to the pain as denial chances of future credit applications increases.
  2. No annual fee: There are very few cards with no annual fee in India. Even though high annual fee cards offer various benefits, zero fee cards are best recommended for a first time buyer. Also before opting for a zero fee card, make sure the fee is zero for lifetime and there is no condition such as if you spend X amount in the first year then only you will be charged zero fee. Otherwise card companies start charging annual fee from the second year onwards which is mentioned in the terms and conditions which is ignored by most of us. There is simply no reason to buy an expensive card although you can buy another one after understanding your buying pattern. Of course, if you are prepared to pay high annual fee in return of greater benefits then you can certainly go for it.
  3. No joining fee: Similar to annual fee, joining fee is also charged by the companies. And even if they don’t, there is a condition to spend certain amount within first few months of buying the card or annually. So check this condition when a card company is charging no fee for joining.
  4. Cash withdrawal: This is very important especially for the individual’s living in smaller cities where credit cards are not accepted widely and have to rely on cash or ATM. Since carrying cash everytime is risky, most of us rely on ATM but not many of us are aware that using credit card for withdrawing cash at ATMs carries a transaction charge in addition to interest on that. Moreover this interest starts from the day money is withdrawn. Don’t think that you will get grace period for making repayment which you get when card is used at merchant/retail store. Also keep in mind that when card is used abroad for withdrawal, it will carry an additional charge. So read this very important point when buying a card and think twice before you using credit card at ATM whether you already have it or not.
  5. Insurance: Many card companies’ partner with insurance companies and offer health or accident insurance to their card customers in order to increase their customer base. Normally such cards carry higher annual or joining fee to which user gets attracted. But terms and conditions related to these insurance policies are not disclosed to the card users at the time of buying. So what happens is that when a need of claim arises, customers are not aware of the conditions. Moreover if you discontinue the card, the insurance policy also gets cancelled. So be sure not to buy credit cards offering insurance policy before reading all the terms and conditions.
  6. Ease of payment and secured: Almost every card company wants to secure their customer’s data by providing highly advanced security features and also offers multiple payment options.

Keep above points in mind before buying a credit card will help you in saving money on your credit card.

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