Finding The Best Credit Card For Your Needs

Today’s most popular payment method is credit card. But how can you choose the proper credit card when banking institutions are producing a wide variety of cards? You’re in good hands; don’t worry. Discover what a credit card is, how it can benefit you in terms of benefits and cashback, and how to choose the ideal credit card for your needs by reading the information provided below. In India, you may find all the information you require about credit cards.

Top 10 Credit Cards In India are Flipkart Axis Bank ,Amazon Pay ICICI, Axis Bank ACE, SBI SimplyCLICK,HDFC Bank Millennia, HSBC Platinum Visa, IDFC First Bank Select, SBI SimplySAVE, American Express Membership Rewards, SBI Cashback Card.

What Is Credit Card?

When used properly, a credit card is a powerful financial tool. A bank will essentially issue you an unsecured loan in the form of a physical or digital line of credit (some banks offer secured cards too). These credit cards, which come in metal or plastic form factors, typically have a monthly credit limit of, say, Rs 10,000, which represents the maximum amount of debt you can borrow from the bank as long as you pay it back within 10 to 20 days (the due date) following the billing cycle of 30 days.

What are the advantages of a Credit Card?

1.Cashback

Cashback in the form of cash or reward points or air miles is the ultimate benefit of holding a credit card. Most cards offer some sort of cashback or points on every purchase. While the super premium ones might offer higher cashback, others would offer lower percentages of cashback to users. There are some exceptions in the entry-level segment, like Amazon Pay ICICI and Flipkart Axis, that offer segment-leading cashback to the tune of 5% on certain transactions.

2. Welcome/ Renewal Offers

Another great part about owning a credit card is the welcome and/or renewal benefits that it offers. In a bid to attract customers, credit card issuers usually give you free cashback, gift vouchers, complimentary subscriptions, and more goodies on successful application. They also offer certain rewards on milestones and yearly fee renewals to keep customers using their cards. For instance, the SBI SimplyClick has a joining fee of Rs 500, and users get a Rs 500 Amazon gift voucher, making the card virtually free (excluding GST).

3. Airport/ Railway Lounge Access

You might have seen premium lounges at airport terminals and railway stations. These lounges can be accessed using multiple credit cards, at the behest of the lounge company. Credit cards will usually advertise lounge access as a perk. You can then take the card to the lounge, swipe it for a very nominal fee of less than Rs 50, and access the sitting area, alongside food and drinks.

4. Fraud Protection

A great, largely underrated use case of credit cards is the element of fraud protection. All payments on your credit card are insured by the issuer bank to an extent and time period. For instance, in case there is a fraud transaction on your credit card, you can intimate the bank immediately. The transaction will likely be blocked and the issue resolved within a reasonable amount of time.

5. Interest-free Credit Period

Another awesome benefit of keeping a credit card is the interest-free credit period, which you can theoretically avail up to 50 days depending on the card and bank. Consider you make a big purchase on the 1st of a month; something that you are not able to pay before your next month’s income comes in, and the credit card bill arrives on the last day of the month. You get 30 days of free credit, along with an additional 10-20 days to pay off the credit card bill before you start incurring any sort of interest.

What are the disadvantages of a Credit Card?

1. High interest rates

High interest rates are a big disadvantage of credit cards, but only if you fail to pay the due amount in the prescribed time period. Some banks are notorious for charging you interest rates up to 50% per year (!!) in case you are not able to make the payment when it’s due. The interest is charged pro rata from the day following the due date.

2. Annual fees

Annual and renewal fees are another disadvantage of credit cards, which is when you are not able to utilize the benefits truly. Because usually with steep fees, cards will offer benefits and offers that will more than make up for the cost incurred.

3. Risk of credit score damage

The point of paying high interest rates and risking your credit score is linked to the condition that you are not able to repay your debt in time. In case of credit card default, you risk reducing your credit score by a lot, which can take months if not years to recover.

4. Possible overspending

If you are not financially disciplined, you will end up overspending and then not being able to pay back the loaned amount. This can lead to a situation termed debt trap.

All in all, credit cards are powerful tools to extract value, both monetary and non-monetary. All it asks for you is to have financial discipline and restraint over overspending. If you can do that, you can reap rewards in no time.

Top Banks issuing Credit Cards

1. HDFC Bank

HDFC Bank is the biggest issuer of credit cards in India. As per the latest data, HDFC has around 24% market share, which means almost 1 in every 4 credit cards is issued by HDFC Bank. In the entry-level segment, the bank offers cards including the Millennia, MoneyBack, and IndianOil fuel. You get popular options like Regalia and Diners Club Miles in the mid-range, and names like Infinia and Diners Black in the premium category.

2. SBI Card

SBI Card is another big player in terms of credit cards in the Indian market. An entity separate from State Bank of India, SBI Card still has the benefit of millions of bank accounts and high serviceability to bring exciting value credit cards to masses. Its SimplyClick and SimplySave are ultra-popular in the basic credit card segment, while the Elite and Prime take the cake in the premium segment with offerings that excite value-seeking customers.

3. ICICI Bank

ICICI Bank is one of the biggest private players in the banking industry in India. This shows with its stronghold in the credit card industry also, where the player ranks on #3 in terms of total credit cards issued. The marquee offering by the bank is the Amazon Pay ICICI credit card, which has registered 2 million customers making it the most popular credit card in India.

4. Axis Bank

Axis Bank is another big private bank in India. The company offers a plethora of credit cards ranging from entry-level options like Axis ACE to super premium cards like the Axis Magnus and Select. Axis is one of the biggest players in the market and is gaining market share with its popular cards that are attracting customers every day.

5. American Express

American Express is one of the premium credit card players in India. Currently paused due to guideline violation, American Express is known for its premium cards, top notch customer service, and exclusive benefits and access. Its metal card – Platinum – is popular for its elite category and limited access partnerships.

Fees and Charges on Credit Cards

There are several kinds of fees and charges that are associated with getting a credit card in India. Let’s list them down and understand what each one is, how it is levied, and how to avoid as many as possible.

Joining Fees

The basics begin when you get the card in your hand. The first charge you will incur is the joining fees you pay for your credit card. While some of the entry-level cards in the market come with waived off joining fees, others come with a nominal fee of Rs 500-1,000. And a lot of those cards offer you gift vouchers equivalent to the value of the joining fees, excluding taxes of course. Premium card joining fees go well into the thousands.

Renewal/ Annual Fees

Some credit cards also come with a renewal fee, apart from joining fee, which is to be paid on an annual basis. In most cases, this is the same amount as the joining fee. For example, the Axis Flipkart credit card has a joining fee of Rs 499 and the annual fee is also Rs 499.

To offset this cost, the credit card issuer offers a feature called fee waiver. Most companies offer you a milestone spending value, over which renewal fee is waived off. In the case of the Axis Flipkart card, it is Rs 2,00,000 in the entire year.

Interest Rate/ Finance Charges

Probably the most complex and expensive charge in a credit card is the interest rate or finance charge or Annual Percentage Rate (APR). The interest rate is the money you have to shell out if you do not pay your credit card bill in time. For some credit cards, this amount is as high as 4% per month or around 50% per annum!

Fret not, you can avoid this charge completely by paying your credit card bill before the due date. It’s not that tough, really.

Card Replacement Charges

Card replacement fee is one insignificant yet noteworthy charge as part of owning a credit card. In the scenario where you lose your credit card or it gets stolen and subsequently blocked, the bank issues a replacement card. For a lot of cards, this is usually waived off by the bank or issuer. However, in certain cases it can range from a one-time fees of Rs 100-500 especially in the entry-level range.

Foreign Transaction Fees

In case you are making a transaction through a foreign vendor, in any other country, a percentage is charged on the transaction. This is levied on all debit as well as credit cards. While some good premium cards offer rates as low as 1-2%, others can range from between 3-5% of the transaction amount.

Reward Redemption Charges

This is one of the least important charges considering it isn’t even levied by a lot of banks. Some banks including SBI and HDFC might charge you a nominal amount of ~Rs 100 when you redeem your reward points for cash, travel bookings, or products.

Cash Withdrawal Charges

Not many know this, but a credit card can be used to withdraw cash from an ATM, as per prescribed monthly limits. However, this doesn’t come without charges. A cash withdrawal fee is usually charged by several banks to discourage converting credit card limits to cash.

Late Payment Charges

Obviously, a credit card is charge-free given you make all due payments before the date provided each month. In case you go beyond the due date, you need to pay interest charges apart from a late payment fee that some banks might charge you. This is usually a one-time fixed fee that could range anywhere from Rs 500-5,000 depending on type of card, amount due, and issuer bank.

Interest Rates on Credit Cards

Credit cards are unsecured loans in essence. Thus, they attract high interest rates. In fact, a lot of credit cards in India have APR or annual percentage rates ranging from 30% to even 50%! This means that missing out on repayments can be quite the hassle for a credit card holder.

We recommend not going over your affordability with your credit card spends. However, in case there is an unavoidable expense, a better way to manage it would be by converting it into a personal loan that usually attracts interest rates of less than 20% per annum. This can be done by requesting the issuer bank once you have debt in your account.

Credit Cards Eligibility Criteria

1. Income group

One of the most important criteria on which credit cards are issued is your income group. While most banks ask for a basic minimum monthly income of around Rs 25,000-30,000, it can go up to multiple lakhs per month in the case of certain super premium credit cards. Make sure you check thoroughly before applying.

2. Age group

Age is another factor that might affect your credit card application. While a lot of banks and issuers ask for a minimum age of 21 years, some might relax it to 18 years for college students and freshers.

3. Credit score

Your credit score is considered when you submit your application for a new credit card. While it is not mentioned explicitly to the customer before application, the basic rule of thumb suggests the premium the credit card the higher is the credit score ask.

4. Location serviceability

Even if you satisfy income, age, and credit score requirements, your application might still be subject to pentode serviceability especially if you live in a remote part of India. Every bank has its own set of pentodes that it services, and you can be filtered during the application process itself.

Documents Required for Credit Cards

While every bank and issuer will require a different set of documents to process your application, here is a general list of documents that are accepted across banks.

For Indian Residents

Identity Proof

• PAN Card
• Aadhaar Card
• Driving Licence
• Passport
• Voter ID Card

Address Proof

• Passport
• Driving Licence
• Ration Card
• Electricity Bill
• Voter ID Card
• Telephone Bill
• Bank statement

Income Proof

• Latest salary payslips
• Income Tax Return (ITR)
• Form 16
• PAN Card
• Proof of business continuity

Age Proof

• Birth Certificate
• 10th Standard School Certificate
• Voter ID Card
• Passport

For NRIs

Identity Proof

• Driving Licence
• Passport

Address Proof

• Passport
• Driving Licence
• Electricity Bill
• Voter ID Card
• Telephone Bill
• Bank statement
• Rental agreement
• Lease/ title deeds