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Availing a credit card has become a necessity today. In our nation, where digital spending is on the increase, credit cards like the AU Bank Credit Card and its variants such as the AU Zenith Credit Card have become crucial in managing finances. They endow the independence to make transactions and pay later benefits, clubbed with reward points, cash back as well as financial security. But before you deep dive into credit cards, it is essential to better understand how to select them wisely.
Essential factors to consider before availing a credit card
This is the highest amount you are authorised to borrow using a credit card. It is determined depending on your credibility, involving parameters such as credit record and income. Being aware of your credit limit is essential for budgeting and forgoing the risk of maxing out your credit card, which can negatively affect your score and lead to over-limit charges.
The APR is a crucial parameter in credit card expenses. It is the rate at which interest accrues on your credit card balance. A reduced APR infers less interest constituent accumulates on any unpaid dues, making transactions or balance transfers even more affordable over the long term. This interest rate is especially crucial if you often hold a balance on the card.
Credit cards often come with various fees – annual fees for card maintenance, late payment charges if you miss the due date and foreign transaction fees for purchases made in a different currency. These fees can significantly increase the cost of having a credit card, so it's important to understand them before applying.
Cashback is a feature where you receive a percentage of your spending back. It’s usually applied to specific categories like fuel, groceries, or online shopping. This can translate into significant savings over time, particularly if these categories align with your usual spending patterns.
Rewards programs vary widely between cards. They can offer points, miles, or cashback on your purchases. Some are general, while others are tailored to specific spending categories like travel, dining, or groceries. Choosing a card with a rewards program that aligns with your regular spending can maximize the benefits you receive.
This feature allows you to transfer outstanding balances from one credit card to another, usually at a lower interest rate. It can be a useful tool for debt consolidation and reducing interest payments. However, it’s important to understand the terms, such as balance transfer fees and the interest rate after the introductory period.
This is the period during which purchases and payments are recorded on your card. Understanding your billing cycle can help you time purchases and payments to maximize the interest-free period and manage cash flow more effectively.
There are mainly two types: secured and unsecured. Secured cards require a security deposit and are typically easier to get if you have poor or no credit history. Unsecured cards don’t require a deposit but generally require a good credit score.
This is the time between the end of your billing cycle and the payment due date. During this period, you won’t be charged interest on new purchases if you have no outstanding balance. Knowing this period can help you plan payments to avoid interest charges.
A credit card’s utility is also dependent on where it can be used. Some cards are more widely accepted than others. This is especially important for international travel or online shopping, where certain card types may not be accepted.
Applying for a credit card involves a credit check, which can temporarily lower your credit score. Moreover, how you use the card (like maintaining low balances and making timely payments) can positively or negatively impact your credit score.
Good customer service is essential for quickly resolving issues like fraudulent charges, lost/stolen cards, or billing errors. A credit card issuer with a reputation for excellent customer service can save you a lot of hassle.
Some cards allow you to convert large purchases into EMIs (Equated Monthly Installments), breaking them into smaller, more manageable payments over a set period. This can be useful for managing cash flow, but be aware of any additional interest or fees.
Credit card fraud can be a significant concern. Look for cards that offer strong fraud protection measures, such as zero liability policies, real-time alerts on suspicious transactions, and the ability to freeze your card.
Initial perks can include welcome bonuses, such as reward points, gift vouchers, or discounts. These perks can add immediate value to the card but compare them against the long-term benefits and costs of the card.
Many premium cards offer additional benefits like travel insurance, purchase protection, or extended warranties. These benefits can provide significant value and peace of mind but check the terms and conditions for coverage limits and exclusions.
Some credit cards waive the annual fee if you spend a certain amount in a year. This can be beneficial if your regular spending easily meets this threshold, effectively making the card free to hold.
These are supplementary cards issued under the primary cardholder’s account for family members. They usually share the credit limit of the primary card and can earn rewards on purchases. Be sure to understand the responsibilities and potential risks involved.
The ability to manage your account online – through a website or mobile app – is crucial for modern financial management. This includes viewing statements, making payments, tracking spending, and redeeming rewards.
These can include exclusive access to airport lounges, hotel upgrades, dining privileges, and concierge services. If these benefits match your lifestyle, they can significantly enhance your card’s value.
A credit card, such as the AU Zenith Credit Card or the AU Bank Credit Card, may be an effective financial instrument if used carefully. By taking these elements into account, you are entering a world of financial flexibility and incentives, rather than simply receiving a credit card. In today's India, where digital banking is fast expanding, having a credit card is more than just about spending power; it's also about financial intelligence. Make the most of it by selecting a card that is compatible with your lifestyle and financial goals. Welcome to the age of smart spending and earning!
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