What Should You Look for in Your First Credit Card

Looking for the right Credit Card which fits your purpose and requirements can indeed be quite the challenge, especially if you’re not familiar with the banking jargon. Moreover, given the plethora of options available in the market for Cards, the whole hunt for your first Credit Card can prove to be an overwhelming experience.

So how do you go about choosing or applying for your first Credit Card? What are the deciding factors you need to look out for? Are all Credit Cards equal? Or are there some better than others? Is there a strategic approach you need to adopt; or do you simply pick the one which sounds the most attractive– for instance, Lifetime Free Credit Cards?

The truth is picking your first Credit Card can be tricky – especially if you haven’t navigated the cards landscape before. It’s akin to a coming to age moment – equal parts daunting and exciting. That said, at some point in your life (whether it’s a new job, at the time of making a big-ticket purchase, or possibly at the time of tying the knot or maybe even later) there will come a time when you might decide it could be useful to apply for Credit Card.

The First Step

Before you go about choosing your first card, you should try to ask yourself why do you need the card in the first place? What purpose is it going to serve? You need to figure out what works best in your case.

Overcome Fears

Most people are skeptical about taking the Credit Card plunge owing to fear of debt. After all, a lot of stories have been painted in media about the dangers of abusing a Credit Card. A lack of awareness can also be blamed for this. Many people opt to not apply for a card fearing they would have to pay enormous interest rates while using them.

There is an element of truth to that – if you apply for a Credit Card without doing much research, you can get stuck with high annual fees, high-interest rates, and no rewards. But if used responsibly, Credit Cards can serve as a powerful tool for building your credit score while also proving to be an invaluable resource at the time of an emergency.

The key here is to use it diligently and correctly, and once you learn how to do that; a Credit Card can reap a whole lot of benefits. You need to understand that at the end of the day, a card is nothing but a tool to use your finances efficiently. Whether it turns out to be beneficial or harmful is entirely dependent on your skills and knowledge as ultimately, you are the individual with the power to choose how to wield this tool.

Don’t go overboard and spend beyond your means – especially large amounts of money you don’t have.

Factors to consider before applying for your first Credit Card

It may be in your best interests to walk before you run and understand certain key factors you need to look out before getting your first-ever Credit Card. This is to ensure you don’t fall into any traps.

1. Annual Fees

There are several Credit Cards out there which charge annual fees ranging from Rs. 250 to Rs. 5,000. However, thanks to the incredible amount of alternatives in the market, the customer is spoilt for choice. You will find ample choice from SBI Credit Cards, HDFC Bank, Amex, and all leading card issuers.

At the time of applying for Credit Cards, make it a point to take a look at the fine print closely. There are several cards which claim to charge zero annual fees– until you get a rude awakening the following year, when you find out that only the first year was free.

There are also certain cards which encourage you to spend X amount every year to get the annual fee reversed for your card in the subsequent year. More importantly, you should bear in mind that in some cases, the potential rewards you stand to gain on certain cards outweighs the nominal annual fee you would have had to pay. So choose wisely as you might stand to gain from better value and more benefits in the long run.

2. Interest Rate

One reason why Credit Cards get the rap they do is because of notoriously high-interest rates. Considering you’re a first-time cardholder and have no credit history or rating to speak of; don’t be surprised if you get quoted for a higher interest rate vis-à-vis other cards. You can generally find monthly interest rates that vary from 1.5 percent to 5 percent or 24 percent to 40 percent per annum. Ensure that you always make the full or maximum payment each month so that you don’t need to worry about accruing any interest. Also, once you get into a pattern of making your card payments on time, you can negotiate for better interest rates with your card issuing bank.

3. Reward Schemes

Credit Card rewards are the grail of using Credit Cards which is why you should keep a keen eye out for cards which has the sort of rewards which aligns with your interests. These rewards could be in the form of cash backs, movie vouchers, air miles, gift cards, hotel stays, etc. For instance, SBI Credit Cards have several types of cards categorised as per rewards you might be interested in. From shopping cards to lifestyle cards to travel and fuel cards, you have an array of options to choose from. Reward programs are the norm for most Credit Cards today but do make it a point to look at the redemption terms as certain types of rewards may have an expiration date on them.

4. Additional Fees

Always be wary of hidden fees and the surcharges that some Credit Card issuers charge when signing up. There are fees such as late payment charges, charges for going over the limit, foreign transaction fees, balance transfer fee, cash-withdrawal fees, etc. which can be quite hefty if you’re aren’t alert.

For instance, if you delay in making a payment, you’ll be charged a fee starting from Rs. 200 up to Rs. 5,000 – depending on the amount pending. However, by being alert, you can avoid paying these fees by simply being aware of your cardholder agreement.

It often makes sense to choose a Credit Card with minimal other fees before making the final choice so that you can avoid significant unexpected charges. In that regard, ensure you go through the fine print to see how much the fees are for the card you’re applying.

5. Credit Limit

Considering this would be your first card, don’t expect the credit limit on your card to be extensive. You need to bear in mind that you don’t have much of a credit score to speak of which is why the likelihood of your credit limit being modest is pretty high. However, that said, the limit should still be reasonable enough to remain practical. The key is to slowly but steadily build up your credit score which, in turn, will also help you in increasing your credit limit over time. 

You can request an increase of your limit after a while and by ensuring that you’ve been making payments on time. Your Credit Card issuing company will in all probability pull your credit history to determine if you’re creditworthy before sanctioning an increase in your limit.

The Bottom Line

Armed with this knowledge, we are sure it will be easier for you to pick your first Credit Card that suits your lifestyle and matches your needs. When used responsibly, Credit Cards can help you build a healthy credit history while also teaching valuable lessons on budgeting and independence. As long as you stick to these guidelines, you should be able to get a great deal on your first Credit Card without any issues. To quote a famous, friendly neighbour Spiderman, “with great power comes great responsibility.”

Also Read: What’s the Ideal Age to Get Your First Credit Card?

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