Credit cards are the convenient form of carrying transactions when a person is on the holiday and cannot carry huge cash in his pockets for shopping expensive items. Banks offer credit cards to individuals with great schemes. However, while buying a credit card; there are few determinants that must be taken into consideration.

 

 

Interest Rates

Interest is the cost charged by the bank on the amount to be taken. It is charged on the annual basis and is treated as the fee paid for the privileges for accessing the credit card.

 

  • You can opt for a fixed rate card that has the same interest each month.
  • Variable interest rate cards have variable rates and can fluctuate every month as a result, increasing in the overall balance.
  •  Fixed card rates are most preferable as they are much stable and one can easily predict how much he will have to pay.

 

Credit Limit:

The maximum amount that is allowed to borrow on your credit card without any penalty is known as Credit Limit.  If you cross the credit limit beyond the allowed limit, you are likely to charge a penalty.

 

According to (CARD Act) it prohibits issuers from charging an over limit fees, unfrequented spending on credit cards can affect your CIBIL score. If you have good credit score, you can receive good credit limit extensions.

 

Annual Fees: 

 

Apart from educational cess and service tax, credit cards also includes  annual fees that comprise of heads. It varies from card issuers and cards.

 

 Some of the heads that are charged by:

 

  • Late payment charges.
  • Cash advances.
  • Requests for increasing credit limits.
  • Balance transfer.

 

Grace Period:

 

It is the number of days given to the borrower to pay the credit card bill over the due date. It is a period that contains no interest and is known as interest free period. A minimum amount must be paid before the due date to enjoy benefits. A grace period can be of about 2-3 days to pay off the outstanding credit card dues.

 

Balance Transfer:

 

Balance transfer is the activity that enables a person to transfer the outstanding debt to another new or least used card. With the help of balance transfer, your credit limit cannot exceed more than 80 %. The balance transfer process generally takes about 7 to 10 working days.

 

Even the credit limit gets reduced with the help of balance transfer.

 

Reward Points:

Reward points are the benefits of credit card spending that a person earns while spending using his own card. They do not have any expiry date and cab be redeemed in the form of movie tickets, free airline tickets, cash backs and many more.

A person with high credit limit can enjoy high reward points.

 

Cash Withdrawal Facility:

When banks issue credit cards they come up with an ATM PIN. This is done to provide you the facility of withdrawing cash from ATM. One must withdraw cash with the help of this activity when one is the pressing need of cash as it carries high rates of interest.