How to Pick the Most Suitable Credit Card

Last Updated: Fri, Oct 04, 2019 12:47 hrs
Credit Card (PTI image)

People are different and so are their preferences. There is no such credit card that can match the needs of everyone. All you have to do is find a card that is suited for your spending habits and financial situation. For example, when you visit SBI website to apply for SBI credit card online, you will find a list of cards that you are eligible for but it is completely up to you to select a card that matches your needs.

Finding the right credit card is not rocket science. You just have to follow four easy steps to narrow
down the options you have.

Step 1# Check Your Credit Score

The first thing to consider at the time of taking a credit card is how creditworthy you are in the eyes of lenders. The best way to reckon this is by checking your credit score. There are four major credit bureaus- Experian, CRIF High Mark, Equifax and TransUnion CIBIL; you can avail services from any of these four. Nowadays, several fintech organizations are also offering credit score and credit report for free to help the users make well-informed loan decisions.

As a customer, you should understand that the banks would not be willing to offer you a credit card if you have a low credit score. Some might provide you a card but with a low credit limit as the low score makes you a risky bet for the bank. So you should work on improving your credit score first. Pay your EMIs on time; maintain a sufficient credit limit on other cards and avoid defaulting on payments to have a good credit score. If you already have a good credit score, you can directly move on to the next step.

Step 2# Identify Your Spending Personality

The next step requires you to take a closer look at your monthly expenses- things on which you spend the most and things that you pay least attention to. Broadly, credit cards can help you in three ways-

  • Building your credit history to easily avail loans in future
  • Earn reward points and redeem them for benefits
  • Make shopping, travel, entertainment easier and cheaper with discounts and offers

A bad credit score hurts your ability to avail loans easily but having no credit history is equally harmful. So if you want to build your credit history, credit cards are the best to begin with. Secondly, if you already own other cards but want to avail bigger and better spend-based benefits, rewards and cashback cards are good. Sometimes banks also offer credit cards with special offers and discounts.

You must identify the specific needs you have and the purpose of getting a credit card. If you are a frequent traveller, a shopping card would not be much of a help; you need a card that is tailor made to provide travel benefits. For instance, if you are looking for an SBI card, you should compare the benefits offered by different cards that SBI offers. If need be, you can also contact SBI credit card customer care to learn about their credit cards and spend-based benefits in detail.

Step 3# Ask the Right Questions about Selected Credit Cards

After identifying your spending personality, you have to shortlist a few credit cards that match your criteria. This is the trickiest part of finding the most suitable credit card. You must ask the right questions about the cards that you have chosen to find out whether it matches the criteria. On the basis of three main problems that credit cards are supposed to solve, let’s find out what the right questions should be.

1- For Building Your Credit History

If you want to take a credit card to start building your credit history, the first thing you need to check is the cost of the card and how it can help build your credit profile. Ask the following questions-

  • What is the annual fee/joining fee on this credit card?
  • Is this card secured against my deposits?
  • Can I upgrade to a better card in future?
  • Can I increase my credit limit in future?

2- For Earning Rewards

If the main purpose of taking a credit card is to earn rewards, you need to concentrate on the types of rewards that it offers, on what spends are these rewards offered and how they can be redeemed.
These are a few questions that you need to ask your bank-

  • What kinds of rewards are offered by the bank on this credit card?
  • On what spends are these rewards offered?
  • How complicated are the rewards on this credit card?
  • How much are the rewards worth?
  • What are the options to redeem these rewards?

3- For Saving Money

Credit cards are your shopping companion but at the same time they can help you save a lot. For those who want to save more with the help of a credit card, the following questions make the most sense-

  • How much is the APR on the selected credit card?
  • Can I transfer my other credit card balances to this card?
  • What is the balance transfer policy on this credit card?
  • What are the fees and charges for a balance transfer?
  • Does it offer a sign up bonus?

Step 4# Apply for the Best Card

Now if you have selected just one credit card in step three, then you are ready to go. Just visit the website and apply online. However, if you have selected two or three cards matching your needs, it is the time to hold a tiebreaker round. While most of the factors will remain the same for the chosen credit cards, you can differentiate them on the basis of a few points that differ.

You need to look closely for differences. Compare the cards on the basis of-

  • Annual fee
  • Joining fee
  • Rate of Interest (APR)
  • Rewards and cashback
  • Reward Redemption Program
  • Discounts and Offers
  • Late Fees and Penalty Policies

Finally, apply for the credit card that you have selected, furnish the required documents and wait for the time when your credit card reaches you. It is not enough to find the right credit card, making the right use of your card is equally important. For instance, if you have taken a rewards credit card, you must use it every time you go out shopping. Use it for booking tickets if you want to earn rewards or air miles.

The chosen credit card should help you achieve your financial goal in the most efficient and cost-effective manner. But this will only be possible if you make smart use of every credit card that you own.