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Credit Cards


Credit Cards

Credit cards not only give us the ability to spend whatever we want at a time when we are temporarily facing liquidity issues, but we also get to maximize the value of those expenses through cashback, reward points, special discounts etc. If we pay the total outstanding amount on time in every billing cycle.

The financial discipline followed by credit card holders while using a credit card helps them to build up their credit history and improve their credit score over time. It is possible that many of you may have been using it as a means of payment for a long time, but there are some important credit card facts that you may not be aware of. Let us discuss some of them so that you can make an informed decision.

If your eligibility criteria are not being met then you can take a credit card against FD

It is true that banks do not offer credit cards to all their customers – they only offer credit cards to those customers who meet the eligibility requirements related to minimum income, credit score, type of occupation, etc. However, if you do not meet all the eligibility criteria, you can request your bank to extend the secured credit card on your fixed deposit. Banks, generally, allow credit cards up to 90% of the FD value, under terms and conditions. But if you default on your credit card dues, the bank has the right to recover the collateralized FDs by liquidating them.

You may be eligible for credit-card linked pre-approved loan facility

Banks often offer pre-approved loans to their select credit card customers. These unsecured loans can carry an interest rate of 12% to 30% p.a., and their EMIs are included in the total monthly card balance and are often linked with the credit card limit. But, due to their pre-approved, these types of loans can be disbursed instantly, which can prove to be a good borrowing tool during any financial emergency.

Having said that, you are also advised to go through everything on the loan carefully, assess its affordability and decide whether to sign a credit card linked pre-approved loan. First your remaining credit card limit (when this type of loan is sanctioned out of it) will be sufficient for other expenses related to your card.

Zero annual fee credit cards are not necessarily the best option

While choosing a new credit card, most of us go for a card with zero annual fees, the reasons for which are also obvious. But, there is also the fact that these zero annual fee cards are often the very basic variant with few benefits attached to them, whereas cards that charge an annual fee carry premium perks and privileges attached to them Like complimentary travel insurance, enhanced rewards program, exclusive discounts on reputed hotel and restaurant chains and select e-commerce websites.

Suffice it to say that if you’re considering a premium credit card, you’ll likely want to go for a variant that is charged an annual fee if you’re comfortable paying for it, especially if you need it instead. You get extra rewards. When such cards are used smartly, the value of the rewards from such cards proves to be much more than the membership charges. Also, there is no dearth of cards whose annual fee is waived off on meeting the spending goals already set. If you use such cards as per your spending pattern, and the annual fee waving limit falls within your budget, you can enjoy all the premium benefits for free.

Any major expenses made through the card can be converted into EMI

Most of you are probably aware that credit card purchases of large sums like gadgets, appliances and furniture from select outlets can be converted into EMI at the time of purchase. But, do you know that there are many cards that offer the facility to convert fixed expenses (post purchase) into EMIs to make them more affordable? This is indeed a helpful feature, but users are advised to get a complete and clear understanding of the applicable charges, if any, before opting for the EMI option.

Most important, ensure that you pay your entire dues on time so that you are not levied additional penalty. Also, keep in mind that your overall monthly card spends, including this type of EMI, should ideally be less than 30% of your card’s total limit to have the least impact on your credit score.

The right to increase your credit limit is at the discretion of the bank

Based on an assessment of the creditworthiness and income of the user, banks obtain information on the applicable credit limit linked to each credit card account. So, if you think that your credit card limit

less, you can contact the bank to request an increase – but the final decision lies with the bank. Having said that, having a high credit card limit doesn’t mean you spend carelessly using your credit card. You should use your credit card responsibly to ensure that you pay your full balance each month. A higher credit limit will help you keep your credit utilization ratio low and is also one of the best ways to maintain a good credit score.

Turns out to be a good sign, even if you sometimes have to spend more through your card for major expenses or emergency expenses. The higher limit entitles you to the premium card variant with even more benefits.

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