Credit card types, benefits, and eligibility: A guide for first-time users

Credit cards, like any financial product, come with both benefits and risks

Credit cards are often the ideal first credit product for many. They offer the convenience of cashless transactions and access to credit for emergencies. However, like any financial product, they come with both benefits and risks. Here's a guide to help you use credit cards wisely.

Types of credit cards available

Each credit card has unique features, including rewards, merchant offers, discounts, and charges. Choosing the right card depends on your lifestyle and spending habits. Here are some common types of credit cards:

Cashback Credit Cards

These cards give you a percentage of your spending back as cash. They typically fall into two categories:

Flat-rate cashback cards: Offer the same cashback rate on all purchases.

Tiered cashback cards: Offer different cashback rates for different types of purchases.

Examples:

- Axis Bank ACE Credit Card

- Cashback SBI Card

- Airtel Axis Bank Credit Card

Lifetime Free Credit Cards

These cards do not charge an annual fee, making them cost-effective. They often offer cashback or reward points on all purchases.

Examples:

IDFC FIRST Select Credit Card

Amazon Pay ICICI Credit Card

Co-Branded Credit Cards

Issued in partnership with retailers, these cards offer exclusive discounts and rewards when you shop at specific stores.

Examples:

SNAPDEAL Bank of Baroda Credit Card

Reward Points Credit Cards

These cards give you reward points for spending, which can be redeemed for cash, products, or services.

Examples:

- SBI SimplySAVE Credit Card

- RBL Bank ShopRite Credit Card

Travel Credit Cards

Designed for frequent travellers, these cards offer rewards like points for booking tickets and discounts on travel-related expenses.

Examples:

- Scapia Federal Bank Credit Card

- Niyo Global International Travel Card

Premium Credit Cards

These high-end cards offer luxury benefits such as airport lounge access, golf course visits, and dining discounts, but they come with higher fees.

Examples:

- Axis Bank Magnus Credit Card

- SBI Elite Credit Card

Eligibility criteria

To apply for a credit card, you typically need to meet the following requirements:

Age: Primary applicants should be between 18 and 60 years old.

Income: A stable annual income, usually between Rs 2.5 lakh and Rs 3 lakh.

Credit history: A good credit score, ideally 750 or higher.

Nationality: Indian residents or Non-Resident Indians (NRIs).

Employment: Stable employment, typically with a minimum tenure of one year.

Being credit-mature

Using a credit card responsibly is crucial. The C.A.R.D framework from Bank Bazaar can help:

Consistent income: Ensure you have a stable income to pay your bills.

Accountability: Track your expenses and pay your bills on time.

Responsible spending: Stick to a budget and understand your card's terms and conditions.

Debt impact awareness: Understand how your card usage affects your credit score and be aware of interest rates and penalties.

Using your card the right way

Activate your card promptly

The RBI mandates that if a card isn't activated within 30 days, it may be cancelled. Activate your card as soon as you receive it to avoid this.

Repay on time

Pay your bills in full and on time to avoid interest charges. Understanding your billing cycle can help you manage payments better.

Monitor your credit utilisation

Keep your credit utilisation ratio (CUR) under 30% and avoid applying for multiple cards in a short period.

Be vigilant

Protect your card information and regularly check your statements for unauthorised transactions.

Avoid overspending

Spend within your means to avoid debt. As Adhil Shetty, CEO of Bankbazaar.com, says: "Credit cards are convenient financial tools, but they require careful management. If cardholders do not pay their dues on time, interest can quickly accumulate, leading to significant debt."