7 Tips To Select The Right Credit Card

Lot of my readers requested me to write a post on tips to select the right credit card. In my previous posts on Credit Card, i highlighted the benefits of using credit card and how can we use credit cards smartly to our advantage. In this post i will suggest 7 most important tips to select the right credit card. It is very important to select the right credit based on your requirement else rather giving benefit, it will eat into your savings from credit card.

1. Say No to Co-Branded Credit Cards: Over last few years, Credit Card Market is flooded with C0-Branded Credit Cards. Banks launch these credit cards in association with a particular brand like ICICI Big bazaar Credit Card, Jet Airways ICICI Bank Credit Card, Standard Chartered Yatra Credit Card,  HSBC MakeMyTrip Credit Card, SBI Railway Card etc.

The disadvantage of C0-Branded Credit Card is that all the benefits of credit card is associated with partnered brand e.g. in ICICI Bank Big Bazaar credit, you will get 6 reward point for Rs 100/= spent in Big Bazaar but for Non Big Bazaar purchase, you will get only 1 Reward point for Rs 200 spent. Therefore these cards are most beneficial for Big Bazaar becoz they are buying customer’s loyalty through this card as user of this card will try to make almost all the purchases through Big Bazaar.

Banks gain becoz partnered brand promote co-branded card heavily through its channel and bank gets more credit card customers without much efforts. Only looser in this chain is User of Co-Branded Credit Card. You can opt for such cards, if u have very very high level of engagement with particular brand else they are waste.

2. Cash Back Cards: Cash back cards are still in a very nascent stage in India becoz of 2 reasons

(a) Annual/Renewal fees

(b) If’s & buts attached with the cash back offer e.g. In a Manhattan Platinum Credit Card, Minimum amount spend should be Rs 1000/transaction to be eligible for 5% cash back or in a Kotak Trump Gold Card, Minimum spend on Dining and Movies should be more than Rs 5000 within billing cycle to enjoy 10% cash back & cash back is applicable only for 5 transactions (Dining + Movie) upto maximum of Rs 600/= in a billing cycle.

It is very important to understand your spending pattern before applying for cash back credit e.g. if u spend more in departmental and super stores then you should opt for Manhattan Platinum Credit Card and if ur spend is more on utility bills then Standard Chartered Super Value Titanium Card is fit for ur requirement as it offer cash back of 5% on fuel @ all petrol pumps + Telecom payments + Rest all utility bills.

Though these cards carry Annual / Renewal Fees but the benefits outweigh the cost. Shortly, i will write a post on Best 5 Cash Back Credit Cards in India.

3. VISA/Master Card Payment Systems: All credit cards carry a logo of VISA, Master Card, American Express, Maestro etc etc..Many people gets confuse that credit card is issued by VISA or Master Card..Fact of the matter is that VISA or Master Card don’t issue any credit card but they are payment systems, which process payment between Merchant Bank and the bank, which issue credit card. In other words they are dependent on banks to issue credit / debit cards by using their payment system.

VISA and Master Card are 2 biggest payment systems in world & you should own atleast 1 card each of VISA and Master Card becoz

(a) VISA / Master Card always run offers for their customers to increase usage on their payment system e.g. VISA Blockbuster weekend offer of Buy 1 get 1 Free on Bookmyshow or Get discount from 5% to 10% on Apollo Clinic, using Credit Card with Master Card Logo. Before making any purchase, its better to check for offers as Rupee Saved is Rupee earned.

(b) Outside India, you will find many merchants excepting only VISA or Master card so if u travel abroad then you should own 1 card each of both the payment systems to avoid any inconvenience.

4. Reward Points: Most critical point to decide credit card…Reward point is nothing but an incentive to use your credit card or you can say its indirect discount on your purchase. Generally each Reward Point carry a value between 25 paise to 50 paise…It is very easy to find out the value of Reward Point. Just check reward catalogue from bank’s site and find out the Market Value of any item in Reward catalogue and how many points required to redeem this item e.g. if a Philips toaster cost Rs 1500 in market & you need 4300 reward points to redeem then value of each reward point is 0.34 paise.

Some banks give higher value per reward point to premium customer and vice versa e.g. HDFC bank i.e. less points required by premium customers and higher points required by regular customers.

5. Flexibility to Change Billing Date: It is very important to know the payment date, which depend on Billing Date. It depend on spending pattern & your salary cycle to arrive at convenient billing date. It is advisable to opt for credit card with a bank, which is flexible in terms of changing Billing date e.g. HDFC bank is rigid in this regard whereas Standard Chartered Bank is very flexible.

6. Interest Free Easy EMI: HDFC bank, ICICI Bank and Citibank are pioneer in this…If u make big purchases like Electronic Goods, Travel etc at regular intervals then its a wise decision to opt for Interest Free Easy EMI option of 3, 6 & 9 months…These days when credit comes at a very high interest rate (Interest Rate on Personal Loan is 16%)…Paying through Interest Free Easy EMI is a big savings even if u can pay lump sum, it is advisable to opt for Easy EMI as you can get interest on the amount. Some of the offers currently live are, you can convert all purchases through HDFC Bank Credit Card at LG Best Shoppe into 3, 6 or 9 months Easy EMI or you can convert all ticket bookings through makemytrip into 3, 6 or 9 months Interest Free Easy EMI by using ICICI, HDFC or Citibank credit card

7. Ease of Payment: Before applying for credit card just check the payment options. Though most banks provide option to pay through net banking or NEFT but for many people, its not a convenient mode to pay..Just check whether your convenient mode of payment is available for credit card payment. If your convenient mode is cheque drop then check whether the ATM of bank is located near your home or office.

Though there is no set rule to select the Right Credit but it depend on your requirement and spending pattern. According to me, you should not have more than 2-3 cards to maintain good CIBIL score. Out of 2 credit cards, one should be of largest issuers like HDFC or ICICI and second one should be Cash back credit card. Maximum transactions should be on Cash Back Credit Card to get maximum benefits. Also one of the card should be on VISA payment system and another on Master Card. Hope u liked the tips to select the right credit card.

Copyright © 2011-2012 Nitin Bhatia. All Rights Reserved.

  • jooker

    nice article

  • manoj

    What are the credit card banks that allow us to change due date?

    • http://www.nitinbhatia.in/ Nitin Bhatia

      As per my knowledge ICICI Bank provide facility to change billing date after 1st billing cycle.

  • Bala

    Dear Sir! Thanks for this article. I have been using Manhattan Platinum Credit card for the past 5 years (with no joining fee and annual fee) and getting cash back of at least Rs 200 per month. However the benefits have been reduced over the years. It actually started with minimum spend of Rs 500 in departmental store for cash back, which has been increased now. But its the best cash back card I have used so far. Another good cash back card is Citibank Cash Back card. I am using that too. Kindly request you to write an article on best 5 cash back credit cards.

    • http://www.nitinbhatia.in/ Nitin Bhatia

      Sure, i will definitely write but there are not too many cash back cards offered by banks.

      • Bala

        Yes sir, that’s correct. Thanks.

  • Arun

    Hi Nitin, just would like to get your opinion on HDFC Corporate Credit Card – Diners Club Rewardz.. they say different cash back with Life Time Free with no condition. Do you have any information regarding this. I always been your follower and all your articles are worth a read

    • http://www.nitinbhatia.in/ Nitin Bhatia

      At macro level, i prefer corporate credit cards as they are bundled with lot of features. At the same time, the acceptability of Diners Club credit card will be limited compared to VISA or MasterCard. Personally i will not prefer diners club credit card.

      • Arun

        Thanks a lot Nitin. Just would like to know a normal HDFC Corporate VISA Card would be good if it is LFT.

        • http://www.nitinbhatia.in/ Nitin Bhatia

          It will be good to go.