Applying for a Credit Card? How to choose Best Credit Card in India (2021)?

When it comes to choosing the right credit card in India, it’s a really tough job. There are hundreds of choices. And as banks see increasing demand for the same, the choices will only increase going forward.

The enormousness of choices make it extremely difficult for a person to pick the right credit card. And did you notice that I used the word ‘right’ instead of ‘best’ above? That’s because there is no one best credit card out there. Different people will find different cards as the right one for them based on what there spending patterns and requirements are.

But before we go about discussing about picking the right best credit card in India, let’s address an important point here.

I am not one among those who would credit cards evil. I think it’s a pretty useful tool. It’s a very convenient mode to make payments if you spend wisely and make your card payments in full before the due date. Then you also get to enjoy great discounts, cashbacks and limited period deals that are often on offer. If that’s not all, proper usage of credit card can help you improve your credit score as well. And since credit card is just a tool, it’s up to us whether we use it properly or not. I knife can do a lot of things. Both good and bad. But we can’t blame the knife if you use it to do things not worth doing. Isn’t it? So for me, and I have said this often, credit cards are not evil.

With that said, let’s move on.

So how to choose best credit cards in India?

The choices available can make you overwhelmed. There are 30+banks offering different credit cards. And each of these banks offer multiple variants. For example, SBI Credit Card alone has more than 40 credit card variants to offer. So there are hundreds of cards out there to pick from.

The key point is that one should select the credit card that is best suited to one’s spending habits and their interest in perks like reward points, cash-back, discounts, offers, etc. There will be no one single card that will meet everybody’s needs.

So before you even go about picking the right card, it is advisable to take a step back and understand your spending pattern first. This might take a few days effort but it will be worth it. How can you do it? One way is to tabulate your spends and expenses over the last few months on a paper (or excel sheet) and categorize them into few broad categories like fuel, dining, groceries, shopping, travel, utility, entertainment, etc. Once you do this, it will give you a good idea about how much you spend on various categories. This in turn will help you focus on where to maximize your benefits via the right credit card.

This small exercise will help you immensely in your decision-making process for how to choose the best credit card for yourself.

So how do different spending patterns call for you picking different cards? Here are a few pointers:

  • If you shop quite often for purchases such as clothes, groceries, gadgets, etc., then look for Shopping Credit Card that has a good reward point system and/or offers discounts at your regular shopping outlets. But that doesn’t mean that you go out of your way to spend recklessly just to get points and offers. Some of the best shopping credit cards are often co-branded, i.e. they give you discounts and extra rewards on spending at specific stores only. So unless you are really into just one brand (or store), this might be limiting.
  • If you need to frequently drive (to work or otherwise) and spend a lot on fuel, then going for Fuel-related credit cards work would work well. I know many people who have recurring petrol and diesel bills in their families and having such fuel-card really helps them. One can get up to 2-3% fuel surcharge waiver by using such cards for fuel purchases.
  • If you need to take frequent flights, then having a Frequent Flier Credit Cards can help you earn miles that can come in handy to get free flight tickets, upgrades, lounge access on airports. Such credit cards are generally co-branded credit cards with an airline.
  • Then there are Travel Credit Cards that are well suited for people who travel frequently and who need to book flight tickets, make hotel bookings and need cash for international spends. So if you are into a lot of travel (for work reasons or as a personal choice to travel a lot), then you should opt for some of the best travel credit cards available in India.
  • Some people like to indulge themselves and prefer to spend a lot on dining out, making high-end lifestyle purchases. There are certain Lifestyle Credit Cards that offer a number of discounts, higher reward points and free concierge services. Generally given the higher benefits, the annual fee for such cards is also higher compared to other regular credit cards. So if you are into indulgent lifestyle, then you might do yourself some good by looking for the best lifestyle rewards credit cards.

By the way, different categories of cards come with different eligibility criteria. So depending on your income, job profile, credit score, existing liabilities, different card issuers might have different criteria for you like SBI Credit Card eligibility. But having a good credit score does play a very important role in card companies deciding whether to issue the card or not and what credit limit to provide to the cardholder, etc.

Talking of credit scores, there is one more type of credit card. There are some people who are unable to get any credit card due to low income or poor credit score. Such people can opt for Secured Credit Cards. These are issued against bank fixed deposits and generally, the credit limit on such secured credit card is up to 80-90% of the FD amount. Such cards can be used to gradually rebuild the credit score by making timely credit card payments. So in general also, if you want to use your credit card to build up your credit score by paying the card bill in full every month, then its advisable to choose a sort of no-frills Credit Card with no annual fees and possibly a low-interest rate.

In addition to the ones above, there are some cards that aren’t exactly spend-category-specific but focus on what happens after you spend. These are mainly of 2 types:

  • Many card providers have credit cards that help you earn reward points on almost all your purchases. These are Reward Points Credit Card. Once a sufficient number of reward points are accumulated, these can be redeemed against various gift items or gift vouchers (which themselves can be redeemed for making purchases elsewhere)
  • Then there is concept of Cash-back Credit Cards that function in a manner similar to reward points credit cards. On using the cashback card, you can get a certain percentage of cash-back on various spends such as dining, ticket booking, hotel booking, etc. This cashback can then be used to adjust against your monthly credit cards bills and thereby cut down the monthly credit card bill payment amount that you need to pay.

As you see, different credit cards suit different types of spending habits. And how you plan to make use of your Credit Card for your spends will eventually play a significant role in determining which card you should finally opt for. So I would strongly suggest that you take a deep look at your lifestyle and spending behaviour and then pick a card that complements your lifestyle needs.

Few more things to discuss.

There are tons of credit cards that have no annual fee (or joining fee). These cards obviously are used to attract small spenders. But on the flip side, the benefits (like reward points, cashbacks, etc.) are limited.

Some cards come with annual (and joining) ranging in few thousands (there are few with Rs 1 lakh annual fee too!). Such cards with high annual fees also offer higher rewards points on card spends. At times the annual fees is reversed if you spend more than a specified threshold amount in a year. For most people, taking a basic credit card is sufficient. But for few who have a lot of spending to make under a particular head, paying higher annual fees on credit cards might not be a bad thing. So if you use your credit cards frequently and spend a lot, then you can explore the cards with higher annual fees (and better benefits).

Many people ask as to why pay a fee when there are zero-fee credit cards easily available. I would say to each his own. Those who want to go for cards that have non-zero annual fee must see if the rewards they will get in return are worth the higher annual fee. So it’s a simple cost-benefit analysis. If you are unsure or are getting a credit card for the first time, then I would suggest that you go for zero-fee cards. Once you figure out how it works and how often you need to use it, you can then consider opting for high-end premium credit cards.

I would also say that when getting a credit card for the first time, try not to opt for co-branded credit cards since all the benefits would then be associated with only the partnered brand.

A discussion on choosing credit cards should not be without talking a bit about the interest rates of credit cards. This is what at times ends up messing card user’s financial lives. For credit cards, generally, interest rates vary from 30% to 48% per annum! So no doubt credit cards are very costly if you are unable to repay the dues in full in time. Sadly, many people don’t really understand how a credit card works and end up getting into huge credit card debt because of that.

Note – Once you get a hang of credit cards and how they work, you can even consider using multiple cards also help maximize the interest-free period on purchases. But caution: This is not advisable for everyone. So don’t do this if you don’t understand this. Suppose you have two credit cards with different billing cycles. One (Card A) ending on the 15th of the month while the other (Card B) ending on the 30th of every month. To maximize your interest-free credit period, use card A for shopping till the 15th of the month. Then from 15th to 30th of the month, switch to spending via card B. Then again from next month, switch back to the card A after the 30th. As a thumb rule, you can use the credit card where the billing cycle is the farthest away from the day of spend. But I must warn here. This works only if bills of all cards are settled in full before the due dates. If you miss it, just a month’s late fee & interest (if you mess the payment cycles) will wipe off all the hard work you did for months. And that is true irrespective of the type of credit card you use after picking the so-called right credit card for yourself.

I strongly suggest you spend some time to understand how credit cards work and how credit card interest is calculated. It will be an eye-opening exercise and you will never look at your credit card dues with the same eyes! And if you ever have doubts about why a lot of us keep shouting to pay your credit card dues on time and before due date, then I suggest you also read this – Don’t just pay ‘Minimum Amount Due’ on Credit Card.

So make sure that no matter what, you should be able to clear each month’s credit card purchases in full by the next month. Any later and you are in trouble. If you are unable to do so, it clearly means that you are spending more than what you can afford to and need to sort things out.

In fact, if someone has run up a lot of credit card debt which is unmanageable for him to repay in one go, it might even make sense to take a personal loan to clear credit card debt as personal loan interest (10-20%) rates are cheaper compared to credit card interest rates (30-40%).

So that’s it.

A credit card if used well can really help manage the expenses in a sorted manner. And if you are a bit smart, you can even get a revolving 50-day interest-free credit period. But if simplicity is what gets you going, then just make sure that you pay your credit card dues on time and in full. That’s it. Also, this would mean that you don’t overspend and use the credit card only for necessities. That would be more than enough and do you a world of good when it comes to managing credit cards.

As for how to select the right credit card in India, the fact is that each Credit Card comes with its own set of unique benefits. And with hundreds of credit cards available in the Indian market, choosing the right credit card one can be pretty confusing. But its simply about one thing – choose a card that is best in line with your spending patterns. That’s it. That will be the best credit card for you.

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