1. Term and conditions
How many times have you read this before - read the terms and
conditions carefully before signing up for anything. For every product
you purchase or service you opt for, always read the terms and
conditions and that includes credit cards. If you find anything in the
terms and conditions of the credit card that was not conveyed to you or
is contrary to what was conveyed to you, then seek a clarification from
the bank. If you are not satisfied with the clarification, dump the card.
It's important that you read up on the terms and conditions before you
use the card and not after. Once you use the card, it is assumed that
you have read the terms and conditions and have accepted the same.
2. Annual fees
It is common for banks to waive off the annual fees/membership fees in
the first year (cards are usually issued for at least two years). The
second year fees are usually charged. It is possible that you are
promised that the second year's fees will be waived off as well. The
only way to find out is to check with the bank in the second year.
It is possible that the bank may waive off the fees based on your track
record of making timely payments. If the bank does not waive off the
fees in the second year, you can cancel the card. However, if you wish
to cancel the card in the second year ensure you do so before using
it, because using the card indicates that you have agreed to pay the
fees/charges for the second year's subscription.
3. Lifetime free cards
Offering 'lifetime free credit cards' is a relatively new trend in the credit
card industry. While there was a time when most banks charged annual
fees on their credit cards, the industry is graduating to a level where
annual fees are being phased out. In effect, clients are being given
lifetime free cards i.e. no annual fees are charged. However, its best to
double-check with the bank what the executive has promised you about
all annual fees being waived off.
4. Minimum payment
One detail you will find relatively well highlighted in your monthly
account statement is the Minimum Payment Due. This is the minimum
amount that you must pay for the purchases done in that month so as
to not attract a penalty for default on payment of card dues.
We would recommend that you pay the entire sum to the extent
possible. Buying on a credit card is okay till the time you pay your bills
religiously. The moment you carry forward your payment to the next
monthly cycle, you will have to pay interest on the unpaid amount along
with taxes. In the final analysis this turns out to be very expensive.
5. Payment by EMI
On the same lines, whenever you make a large purchase (usually over
Rs 10,000, although the amount varies across banks) you may get an
offer from the bank to opt for the EMI (equated monthly installment)
facility to make the payment. This facility does not come cheap and the
interest on the EMI is prohibitive. Again to the extent possible, we
recommend that you make the payment before the due date in one go
and give the EMI facility a miss.
6. Borrowing cash is expensive
Credit cards can be used for making purchases on credit as also for
borrowing cash. While making purchases on your credit card (so long
as you pay on time) is okay, borrowing cash on your credit card is a
very expensive affair. Avoid borrowing cash on your card; use the card
to the extent possible for making purchases.
7. Insurance benefit
Many credit cards are known to offer an insurance cover. We
recommend that you ignore this benefit and go for the core offering -
credit card. If the card has features that suit you, then you can opt for it
even if there is no insurance cover. On the other hand, if the card
features are not to your liking then reject it regardless of the insurance
In any case, on most occasions the insurance cover is usually linked
with so many terms and conditions that it is very difficult to claim the
same. It is altogether another thing that the insurance cover is unlikely
to be sufficient for you.