Getting your first credit card is a big milestone for many students and young adults who have less income or not having income proof documents. Getting that first credit card is an essential part of money namagement. Before actually settling on a first credit card, you must consider numerous factors, like what your requirement, where will you spend, what additional fees you’ll need to pay and which card offers the best rewards. The idea of getting a first credit card can seem intimidating and confusing at first for everyone.
Choosing your first credit card also a big dessision to build your healthly credit score. Credit cards are potent financial instruments which, when used carefully, can unlock doors to generate a strong credit history. But how precisely is one meant to get their first credit card? The symbols of credit independence are indications that you are financially prepared to accept financial responsibility and begin your credit journey.
Credit Card Basics-
Any Payment mode like Netbanking, Debit Card, Credit Card or UPI are used to make purchases, there is a only difference in where the money comes from. The most important aspect about credit cards is that simple, you’re not spending your own money. While debit cards/Netbanking/UPI take funds out of your bank account, credit cards charge purchases through a line of credit limit which is provided by your Card Issuer according to your repayment capacity. You are then responsible for repaying the loan amount you spend by an assigned due date. Starting by familiarizing yourself with some of the most common financial words used when talking about credit cards :
- Joining fee: A processing fee laived in 1st statement when you opting for credit card. Generally banks provide you Gift vouchers as joining benifit.
- Annual fee: An annual fee is an amount charged every year for borrowing money from a credit card.
- Credit Limit: Also called a credit line, a credit limit is the maximum Rupees amount of credit cardholders are allowed to borrow.
- Statement: Your credit card statement is a summary of billed transactions that you have made within a billing cycle.
- Grace Period: A grace period is a set time after the due date in which a payment can be made without being penalized.
- Minimum Payment: Your minimum payment is the minimum amount you must pay towards your balance each month.
- Chargeback (Dispute): A chargeback occurs when you work with your card issuer to remove an unauthorized charge that has appeared on your statement.
- Secured Credit Card: A card which bank issuing agaist Fixed Deposits (FD) or Holdings without any Income documents.
- Unsecured Credit Card: A card which bank provide against you Repayment capacity which decided through Income Proof, Cibil Score and other factors.
- Credit Score: A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.
- Cashback/Rewards: For using credit card, you will get cashback or rewards. You can get Digital vouchers (Example- Amazon Pay Gift Card) through rewards points redeemption.
Tips on what to look for in a first credit card-
Here is my tips when you choosing your first credit card :
Be Aware of Joining and Annual fees-
In above basis of credit card, I already discribe about Joining & annual fees. People might look down on the idea of having to pay additional money for having a credit card. But if a credit card carries a joining fee and an annual fee, there’s usually a good reason for it. For example, a card with a high annual fee will come with more reward benefits. If you spend enough money on the card, the rewards you earn could offset that annual fee amount very easily. Many of cards providing annual fee waiver if you spent certain amount previous year. For examply SBI SimplyClick having ₹500 yearly fee but waived if you spent ₹1 Lakh in previous year.
Apply for Basic credit card-
As a 1st credit card, you must avoid to apply premium credit card. Premium card always hard to approve and very high Joining & Yearly fees. Generally bank never approve you Premium card even you have high income proof. For first credit line, bank will give you very low limit and will increase after seeing your repayment history every 6 months. And Premium cards need higher limit for approval.
Banking Relationship matters-
You must take the benifit of your banking relationship. If you have Salary/Business account on XYZ Bank and older then 6months, You must apply for card in same bank. Because bank have all your banking history and its will help bank to decide on your favour.
If you have normal saving more then 1 year and you have very good transaction or holding money. there is a chances of Pre-approved credit card on your account without any Income documents.
Avoid card which required high Credit Score-
Simply avoid as your 1st credit card if it required high credit score. Many cards required more then 775 Credit score. Even many basic cards require high credit score and Income like in Axis bank Both Axis MyZone and Axis ACE are basic credit card. But You can’t get Axis ACE easily.
Decide what will you use and Cashback/Rewards-
Knowing how exactly you plan to use your credit card is essential because once you figure it out, you can choose which card will beneficial in terms of cashback and rewards. Getting a credit card that offers cashback is great because for certain purchases you can get a certain percentage of money back.
Credit card is very good if you can use wisely.