As per a report by Research and Markets, the Indian credit card market is expected to grow at a CAGR of 25% between 2020 and 2025.
More and more non-financial companies are joining the market in partnership with financial institutions. The products thus developed offer innovative and lucrative benefits that are only available in India.
As the number of credit card users grow, the primary concern for them is to pay the monthly bills on time, along with building a credit track record. Timely payment of bills is among the most important credit card rules that help to guide a new customer.
There are multiple other rules and guidelines; the essential ones for beginners are discussed below –
- Understand how credit works
Before obtaining the best credit card in India, it is advised to understand how the line of credit works.
There are several types of credits, and they can be broadly categorized as static credit and revolving credit. Through credit cards, financial institutions offer a revolving line of credit, unlike loans.
Credit cards have a specific limit, also referred to as credit limit, up to which you can spend before repaying a certain portion of it to the issuer.
- Apply for a credit card as per your financial strength
Financial experts advise individuals to apply for a credit card only if they possess the financial stability and management expertise dutifully to pay the full credit card bill each month. If you are unable to pay the total amount due in each billing cycle, you will be subjected to substantial interest.
Hence, in order to be liable for interest payments, which grow exponentially if not paid within the stipulated period, it is mandatory to pay the bills on time. If your current income is not adequate to deal with your credit card bill payments, you will accumulate debt. This will, in turn, have a negative effect on your overall finances and credit score.
So, as per the essential rules to using a credit card wisely, it is always advised to opt for a card if you have the financial capability to support it.
- Take advantage of your credit card
Another one of the vital credit card rules is to consider various ways by which you can take advantage of your card to improve your finances. For example, if your daily schedule involves road travel in your vehicle, applying for a fuel card can be beneficial in lowering monthly expenses towards purchase the same. A fuel credit card offers discounts on fuel purchase or accelerated reward points.
- Redeem your reward points
Reward points are one of the reasons why you are smarter with a credit card in your pocket. For every transaction with a credit card, cardholders accumulate reward points.
These points can be redeemed later for cash, discounts on purchases, gift cards, mobile recharge, etc.
Credit cards like the Bajaj Finserv RBL Bank SuperCard offer 20,000 reward points as a welcome bonus to their new customers. Customers can also earn reward points when crossing milestones.
This NBFC also brings forth pre-approved offers that make availing financing time-saving owing to a hassle-free process. Such offers are applicable to several financial products such as personal loans, business loans, etc. Check your pre-approved offer by providing your name and phone number.
- Refrain from withdrawing cash from ATMs
One of the crucial credit card rules for beginners is to not take cash advances as card issuers generally charge high interest for such actions. However, there are several credit cards that only charge a nominal processing fee for the withdrawal of cash from ATMs.
Hence, you should choose the right credit card for yourself if your spending habit involves the frequent withdrawal of cash.
Lastly, financial institutions look at various factors to check whether you are eligible for obtaining a line of credit. Such factors include your annual income, existing debt, credit history, etc. If you meet the eligibility criteria, your lender will approve your application.