Today, in this fast life, a credit card is essential as one requires it to maintain proper finances. For those in their beginner stages, it can not be just a means for borrowing money but rather stepwise towards building up credit, acquiring more freedom of finance, and then eventually benefiting from rewards. To beginners, the world of credit cards is a sea. So, this guide will take you through everything you need to know about getting and using a credit card for beginners in India.
What is a Credit Card?
A credit card is an official instrument of a bank or any other financial institution that permits one to buy things on credit.
This is equipped with a pre-approved credit limit, the amount up to which you are authorized to borrow. In contrast to the debit card, which will actually deduct money from your current bank account, a credit card will let you borrow up to a certain amount and repay later, usually monthly.
The credit card issuer charges interest on any outstanding balance that is not paid off by the due date. You can avoid interest charges if you make timely payments, and you can use the card as a convenient tool for everyday purchases, both online and offline.
Benefits of Having a Credit Card
1. Building a Credit Score
This is perhaps the most important advantage of a credit card: it allows you to maintain a good credit score, which is crucial in order to get loans, mortgages, even rent an apartment.
2. Emergency Fund Facility
A credit card is your financial safety net in case of emergencies. Whether it is an unexpected medical expense or a sudden repair, access to credit can help you manage such situations without disrupting your savings.
3. Rewards and Cashback
Most of the credit cards available in India have a reward scheme wherein a cash amount, discount, or points are gained on every purchase. Redeemable products vary widely, while some provide discounts for travel. Even statement credits can be redeemed through the rewards on a credit card. A beginner always starts by taking a cashback or reward credit card on every-day purchases; it is like making spending work for you.
4. Security and Fraud Protection
Credit cards provide better fraud protection compared to debit cards. In case someone uses your card fraudulently, you can dispute the charges and get your money back. Most credit cards offer purchase protection and extended warranties on purchases, making them safer for online shopping.
5. Conveniences
Credit cards make transactions easier. You don’t have to carry cash, and most credit cards are widely accepted both online and in physical stores. In addition, you can make purchases abroad without having to worry about currency exchange rates.
How to Select the Right Credit Card as a beginner
Choosing the right credit card is a very tough task due to the availability of ample options in India. Here are some key factors to consider:
1. Annual Fees
Many credit cards charge an annual fee, while others are charged free of fee for the first year. When you become accustomed to how they work, choosing a low or no-cost annual fee card is important. Be sure you don’t look past hidden costs and that you understand exactly what it costs.
2.Interest Rates
Interest rates change according to credit cards (APR—Annual Percentage Rate). You mostly carry some balances, so make sure your card is one that has lesser interest. Avoid high interest charges at all costs by clearing all of your balances at the end of the month.
3. Reward Program
If you want to earn rewards or cash back on your purchases, a card with a rewards program will be ideal. Some cards give you cash back on daily expenditures such as groceries, fuel, and dining, while others offer you travel points. Pick the one that suits your spending pattern.
4. Credit Limit
As a beginner, your credit limit may be lower compared to someone with a more established credit history. Make sure your card has a credit limit that suits your needs, but avoid maxing it out. Maintaining a low credit utilization rate (under 30%) is crucial for a healthy credit score.
5. Additional Benefits
Look for more rewards such as discount offers on dining, traveling, or online shopping, free lounge access at the airport, and even free insurance coverage. Such benefits can really enhance your card.
Credit Cards for beginners with Bad Credit Score
If you are a beginner and your CIBIL score is low, do not worry-there are plenty of credit cards available for a fresh person that will help in initiating the credit building process in the future. A few suitable options are for lower credit scores:
1. HDFC Bank EasyShop Platinum Credit Card
HDFC EasyShop Platinum Credit Card is a good credit card for beginners with low CIBIL scores. The annual fee is minimal, and the interest rate is very minimal. The card offers reward points for every purchase, which can be availed for products. Access to airport lounges for free along with the fuel surcharge waiver makes it a good card for someone who has just started his credit journey.
2. SBI Card Unnati
SBI Card Unnati is a credit card for people with low credit scores and for those just starting their journey in the credit card world. It comes with no annual fees for the first four years, cashback rewards on purchases, reward points, and discounts on dining and shopping. It’s good for people who want to build up a credit history while enjoying other perks like fuel surcharge waivers and movie ticket discounts.
3. ICICI Bank Coral Credit Card
Another great card for new people is the ICICI Bank Coral Credit Card, especially when their CIBIL score is low. It’s a low fee card that rewards users with various rewards such as cash back for movie tickets and dining bills, in addition to airport lounge access for free, so this would be ideal for people looking for extra benefits on the way of building credit.
4. RBL Bank Platinum Maxima Credit Card
RBL bank offers the Platinum Maxima credit card for people with even relatively lower CIBIL score. It offers diverse types of rewards wherein benefits of cash back on any spendings related to shopping as well as fuel as such are available, and also savior from the expenses of dinners or lunch. The product would allow large purchases to turn to easy monthly EMIs without much burden on such applicants who want to avoid improper payments.
5. Axis Bank Insta Easy Credit Card
The Axis Bank Insta Easy Credit Card is a great option for people with zero credit history or a low CIBIL score. This is a very easy-to-get card with minimal documentation requirements. It has no annual fee for the first year and offers cashback in certain categories, such as dining and groceries. This card also has a low credit limit initially, which you can manage your finances on and build your credit score better.
Eligibility Criteria to Avail a Credit Card in India
Before getting an application for a credit card for beginners in India, there are certain eligibility criteria to be known. Requirements can differ from bank to issuer; however, some of the general guidelines have been listed below:
Age:
You must be at least 18 years old to apply for a credit card in India. In some banks, the minimum age is 21 years for specific types of credit cards, especially for students or people with a limited credit history.
Income:
Generally, credit card issuers always insist on a minimum income requirement. Minimum income requirements for entry-level cards can be as low as ₹15,000-₹20,000. For premium cards, your income may need to be higher.
Employment Status:
Credit card issuers like salaried individuals or self-employed people earning a steady income. Issuers also issue cards to students, although the credit limit is lower with such cards and is used for building credit history.
Documents:
•Document of identity (Aadhaar, Passport, PAN)
•Document of address (Utility bills, Aadhar, Bank statements)
•Document of income (Salary slips, Bank statements)
Credit Score:
First-time applicants do not have a credit score. Good credit scores, however, are likely to improve the chances of getting approval. A credit score of above 750 is said to be a good number for credit cards with more benefits. You can use a beginner-friendly credit card if you have a poor CIBIL score. Over time, the score is likely to rise.
How to Apply for a Credit Card
1. Choose the Right Credit Card:
Research various credit cards and compare their features, benefits, and eligibility criteria. Use comparison websites to get a detailed breakdown of each card’s offerings.
2. Fill Out the Application Form
Once you have chosen a card, you can apply online on the bank’s website or offline at its branch. Be sure that you have all the relevant documents for this process to be completed.
3. Submit Documents
Scan and attach your ID proof, address proof, and income proof. Some banks also ask for submitting a passport-sized photograph.
4. Wait for Approval
The bank will consider your application depending on your eligibility, which is based on your credit score and income. After approval, you will receive your credit card within a few weeks.
5. Activate Your Card
Once you get your card, activate it following the instructions from the bank. Normally, this is done by calling a number or using internet banking.
How to Use a Credit Card Responsibly
1. Pay Your Bill on Time
Always make your payments on time to avoid late fees and interest charges. Most credit card companies offer a grace period of 20-50 days to pay your bill without incurring interest.
2. Keep Track of Your Spending
Monitor your spending regularly through your card issuer’s app or website. Setting a budget and sticking to it is essential to avoid overspending.
3. Avoid Maxing Out Your Credit Limit
It’s best to use no more than 30% of your credit limit. A high credit utilization ratio can hurt your credit score and make it harder to manage your finances.
4. Pay More Than the Minimum Due
This would pay minimum due, but instead pay out the full balance on which you will save on adding on interest and debt.
5. Use Alerts
Always install payment reminders and set your balance alerts to track up your credit card use in time.
A beginner’s credit card in India could thus serve to be the best financial tool provided they have been used judiciously. With the right card, terms and conditions understood, and responsible spending practiced, you can create a strong credit history, earn rewards, and have more flexibility in your finances. Start small, pay on time, and use your card to unlock all the benefits it offers. Don’t worry if you have a low CIBIL score-there are several credit cards specifically designed for such scores.