Credit cards not just enable us to make preferred costs even if there are short-term liquidity challenges but also make sure we maximise the worth of these costs with rewards like cashback, reward points, particular discounts, and so on., at no added price if we clear our total outstanding in complete on time through each and every billing cycle.
Financial discipline when working with credit cards also aid their customers in developing their credit histories and enhancing their credit scores more than a period of time— factors that hold them in very good stead when they apply for larger loans like home loans, individual loans and vehicle loans in the future. While lots of of you have been working with this payment tool for a when now, there are nevertheless a couple of crucial credit card details that you could not be conscious of.
Let’s go over some of them to aid you make informed choices.
Credit card against FD
It’s a reality that a bank does not present credit cards to all its customers—they do so to only these consumers who meet their eligibility needs pertaining to minimum revenue, credit score, variety of occupation, and so on. However, if you do not meet all the eligibility criteria, you can strategy your bank requesting them to extend a secured credit card against your fixed deposits. Banks usually enable credit cards with limits up to 90% of the FD worth topic to terms and circumstances. However, if you default on your credit card dues, the bank has the suitable to recover them following liquidating the collateralised FD.
Credit card-linked pre-authorized loan
Banks typically extend pre-authorized loan provides to their chosen credit card consumers. These unsecured loans could involve interest prices of 12%-30% p.a., their EMIs get added to the total month-to-month card dues and are commonly linked to the card’s credit limit. However, owing to their pre-authorized nature, such loans can be disbursed rapidly generating them terrific borrowing tools through any type of economic emergency.
That stated, study the loan fine print meticulously, assess its affordability and make sure your balance credit limit (following such a loan is sanctioned out of it) would be sufficient to accommodate your other card spending needs prior to signing up for a credit card-linked pre-authorized loan. If you really feel the applicable prices are higher, you can think about going for other loan merchandise like individual loans and secured loans to meet your borrowing requirement.
Zero charge cards are not the greatest alternatives
While deciding on a new credit card, most of us have a tendency to gravitate towards zero annual charge variants for clear factors. However, the reality remains that typically these zero annual charge cards are the most simple variants with only a couple of rewards when cards that do charge annual charges come with premium perks and privileges like complementary travel insurance coverage, enhanced rewards programmes, particular discounts at reputed hotel and restaurant chains and pick e-commerce web sites, and so on. If you are seeking for a premium credit card, you could want to go for a variant that charges an annual charge if you are comfy paying it, particularly if you get added rewards in return.
When employed smartly, the worth proposition of the rewards of such cards could simply exceed the membership charges. Also, there is no dearth of cards whose annual charge could be waived on meeting pre-defined spending targets. If you use such a card whose rewards are aligned with your spending patterns and the annual charge-waving threshold is inside your price range, you could get pleasure from all the premium rewards totally free of price.
Big-ticket expense into EMIs
Most of you might be conscious that major-ticket purchases like gadgets, appliances and furnishings from pick outlets made by way of credit cards can be converted to EMIs at the time of buy.
However, lots of cards also come with the facility of converting eligible costs (post-buy) into EMIs to make them more economical. This is a valuable feature, but customers must get comprehensive clarity about applicable charges, if any, prior to availing the EMI alternatives. Ensure you clear your dues in complete on time to keep away from added penalties.
Also, your combined month-to-month card costs, such as such EMIs, must ideally keep below 30% of your card’s total credit limit to minimise adverse effect on your credit score.
The writer is CEO, BankBazaar.com