Quick cashless payments. Hassle-free payments while travelling. Exciting rewards on every transaction. This is what your lifestyle with a credit card looks like. A credit card is a potent financial tool to build a solid credit history over time and enjoy maximum financial convenience.
But using a credit card requires excellent financial discipline. If you're a first-time credit card user,it is easy to get overwhelmed by how much you don't know. From understanding how different cards work to choosing the best first credit card to build a credithistory, you have quite a journey ahead.
Ready to apply for a credit card for the first time?Here are the top 9 things you must know before getting your 1st credit card.
1. There are different types of credit cards
Most top financial institutions in India bring you a range of credit cards with varying rewards and benefits to suit your lifestyle. For instance, when applying for your first credit card, you can opt for a beginner-level credit card with a low annual fee. Moreover, you can choose a good first credit card based on your financial requirements and lifestyle needs, such as a travel credit card, rewards credit card, fuel credit card, and more.
2. Know about 1st credit card interest rates
Your credit card carries an Annual Percentage Rate, the interest you pay on your card for borrowing money. If you pay your credit card dues on time and in full, your credit card won't attract any interest charges.
However, if you carry a balance on your credit card, the financial institution will charge you a pre-determined interest rate, which can quickly put a hole in your pocket. Therefore, you must take time to review the fine print and ensure your credit card doesn't have a high interest rate.
3. Check the reward points on your 1st credit card
Credit cards offer you more than just ease of transactions and credit-building ability. They are most popular for the exclusive deals and rewards they offer, and as a first-time credit card user, you must make the most of it.
From shopping and entertainment to dining at your favourite restaurant to travelling, a credit card offers you rewards points and discount offers on every transaction. And if that's not enough, you can even apply for a first credit card with targeted rewards. For instance, if online shopping is your thing, you can opt for a cash-back credit card to save money whenever you shop. Or, if you travel a lot, you can go for a travel credit card that offers you amazing rewards and savings on travelling and foreign transactions.
4. Always pay your bill in full
The best way to practice financial discipline as a first-time credit card user is to pay off your credit card bill in full every month. This will keep the interest charges from accumulating and also increase your credit score. Not to mention, you will avoid late payment penalties.
However, if you find yourself in a situation where you cannot pay the bill in full, try to clear the minimum payment and avoid making any big purchases on your credit card. This will help you reduce your financial burden.
5. Grace period
A grace period is a time during which the credit card issuer doesn't charge you interest on new purchases if you pay the bill in full and before the due date. Before you apply for your first credit card,enquire about the grace period from your issuer and how much interest they will charge if you miss the grace period. Typically, it starts from the end of the billing cycle to the next due date.
6. Start with a low credit limit
When you apply for a credit card first time,it takes time to understand how the credit card works and how to manage it effectively. As a result, most credit card issuers or financial institutions will offer you a low credit limit, to begin with.
Starting with a low credit limit is a good way to keep your expenses in check and make sure you can afford to pay the credit card bill in full.
7. Credit cards have an impact on your credit score
The best first-time credit cards have a huge role in determining your credit score. If you use your credit card judiciously while paying the bills on time, it can give a significant boost to your credit score.
However, if you end up spending beyond your credit limit or carry a balance on the card each month, not only will it attract an interest charge, but your credit score will take a hit. Without a doubt, credit cards are the best way to build your credit history. So it's wise to be disciplined in your approach when using a credit card.
8. Additional charges on your 1st-time credit card
When you're looking to apply for a credit for the first time, make sure to enquire about the fees and additional charges associated with your card. Any good 1st credit card can include various charges, including joining fees, annual fees, late payment penalties, transfer charges, over-limit fees, and more.
As a first-time credit card user, knowing about these charges beforehand will help avoid paying for any unexpected charges.
9. Your credit utilisation ratio matters
Even when you are spending within the credit limit on your first credit card, you must keep an eye on your credit utilisation ratio. The credit utilisation ratio affects your credit health – a higher percentage can indicate overspending and negatively impact your credit score, even if you have a stable repayment history.
As a rule of thumb, it is best to use only up to 30-40% of your total credit availability. This will ensure you make the most of your best first-time credit card without burdening your finances.
In Conclusion
Applying for a credit card for the first time is a big financial step. By understanding how it works and following financial discipline, you can successfully maximise its benefits and enjoy significant savings on your transactions.
Not sure if you want to apply for your first credit card? Fret not! Manage all your financial needs with a quick personal loan from Tata Capital! Featuring competitive interest rates, flexible repayment structure, and fast approvals, our multipurpose personal loan will help you meet all your financial goals with ease.
01 December 2022
6 mins read
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