Spend Smart: How to select the right credit card

Analysing your spending pattern can help you decide

Unless you are disciplined with your finances and the kind of person who will pay the full amount due on your credit card, don’t opt for one. If you have managed to achieve some financial discipline and want to use the various benefits, keep in mind a few things while selecting your credit card.

Before picking a credit card, do remember that having multiple credit cards is not suitable for anybody. At most, you should have two credit cards. But even that’s too much if you are not financially disciplined.

Reward points

A credit card can help you accumulate points when you swipe the card. Besides that, all you get is credit for 40-50 days. So, you must pay attention to how many points you earn for spending every rupee. Some credit-card companies also offer cash-backs on specific purchase above a limit, at stores or online.

These can broadly be categorised as reward programmes. When you are picking a credit card, all that matters is the rewards programme that the company offers. Let’s figure out how to go about picking a credit card with the best rewards programme.

Nowadays, there has been a flurry of pestering calls or text messages offering a free credit card to people. As a thumb-rule, don’t fall for the free credit card offer. It may be worth paying a yearly credit-card fee if the benefits far outweigh the costs. This is basically a yearly payment to enter the rewards programme.

Choosing your card

First, analyse what you spend on the most. If you are a frequent flier, and depend on a credit card to help curb your travel and hotel expenses, then you definitely need a travel credit card. These cards help you accumulate miles that you can redeem as tickets on a specific, or multiple airlines, depending on the card you choose. There are also some that give you free flight tickets and hotel stay vouchers.

There are many travel credit cards like Axis Bank’s My Wings, Citibank’s Premiermiles and HDFC Bank’s Superia Credit Card.

What you must keep in mind while opting for any travel credit card is the conversion ratio — how much you must spend to earn the miles or points on your card, like five points/miles for ₹100 spent. Citibank’s card gives 10 miles for every ₹100 spent to book flight tickets or hotels on its dedicated portal.

These travel credit cards have additional benefits of redeeming your points/miles on the catalogue of products available on the rewards programme website, and offers on dining and movie tickets.

In case you have decided on your travel credit card and really want to have more than one credit card, or if you just want one credit card for now, you should dig deeper into your spending patterns. Check if you spend more on dining out, watching films in theatres or shopping online, or fuel. Many credit-card companies waive off the fuel surcharge that you must pay when paying through cards at petrol filling stations.

When you are choosing a card based on your lifestyle choices, there may be too many options. But remember, getting a co-branded card with a retailer could be a mistake. This will limit your ability to spend and earn more reward points, and avail offers at other retailers, or when you dine out.

Analysing your spends will help you zero in on the right credit card. Even here, there are credit cards that charge you a yearly fee.

Remember, if the conversion into rewards and bundled benefits with the card outweighs the initial charge, it could be beneficial paying a yearly fee. The reward points can be redeemed at their designated portal from a catalogue of items.

When opting for a credit card, remember that having more than two credit cards is not advisable. Don’t pack your wallet with cards just because a credit card has a good rewards programme.

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