3 Reasons Why You Should Upgrade Your Credit Card

Most of us start off our ‘plastic’ life with a basic credit card because that is all we are eligible for in the beginning of our careers. As we start using our cards, we realize our spending and repayment patterns.

So, you’ve had your card for some time now, and are wondering whether you should trade it in for a shinier, new plastic. Here are 3 reasons why you should upgrade your credit card:

Higher Credit Limit

The credit limit that you are offered on your credit card is based on your monthly/annual income. So, if you’ve seen an increase in your income, you will be eligible for a higher credit limit. Having a higher credit limit increases your purchasing power, and at the same time can positively affect your credit score as well. There is a component in your score called ‘credit utilisation ratio’ that takes into account the amount of credit you have used in relation to the total amount of available credit.
So, if you increase the credit limit on your card, then your total available credit will also increase. And if you keep your spending habit consistent, then your credit score could increase as well because a low credit utilisation ratio = higher credit score.
If you’re considering increasing your credit limit, you have two options: you can either increase the limit on your existing card or get a new credit card with a higher limit. This decision should be based on what perks you are currently offered on your existing card and if you can find a card to better suit your financial and lifestyle needs.

Credit Card Rewards

Basic credit cards, as the name suggests, offers ‘basic’ rewards. It’s a starting point to build your credit score and may not benefit you much when it comes to rewards. There is no dearth of credit cards in the market today – you can find a card that rewards every inch of your lifestyle whether it is shopping, eating out, travelling, and so on.
If your existing card is not rewarding you well enough as per your spending pattern, then it might be time for an upgrade. Using a card that rewards your spending behaviour can help you save significantly. There are credit cards that offer reward points, cashback, and air miles on eligible spends that you can redeem for gift vouchers, flight tickets, merchandise, discounts, and offset future transactions.
So, if you dine out frequently but currently have a card that rewards grocery spends, then you’re not reaping the rewards, literally, and it might be time to trade your card in for a dining credit card.

You’re Paying a High Annual Fee

If your current card rewards your purchases, but at the same time charges a high annual fee, then the benefits cancel out the cost, i.e. you’re not really saving or earning anything by using your card. One of the biggest incentives to use a credit card is to save on purchases by earning and redeeming rewards. But if your card is “high maintenance”, emphasis on the ‘high’ and does not offer higher benefits for the price, then it might be the right time for a change. Choose a card that either comes with no or low annual fees with good perks or even if it charges a high annual fee, it offers even better rewards.
You should also read the most important terms and conditions of your card to see what other charges you’re incurring. These could be the interest rate, late payment fees, and so on and compare it with other cards to see the difference in pricing.
Want to upgrade your credit card? In addition to saving on money, if you wish to save time on research as well, you can visit credit card comparison websites such as BankBazaar, compare the perks, fees, and charges of various cards, and apply online conveniently.

Learn About These Credit Card Charges To Make Smart Credit Choices

Credit cards have rapidly become a key ingredient of the growing paperless economy. These help you to increase your purchasing power. You can make quick and easy payments even if you do not have the required funds at your disposal. Many card issuers also reward their customers with attractive offers, discounts, cashback deals and exclusive benefits on select purchases. Credit cards also offer an opportunity for you to build your credit unlike debit cards. However, credit cards must be considered as a short-term loan. It includes regular interest payments among other charges.
Every credit card company attaches interest rates and charges based on their discretion. It is important to learn about the charges and compare the interest rates before opting for a credit card.
If you are looking to apply for a credit card, consider the following costs and charges attached to a credit card:

Annual fee payment, fees for joining and renewal

Every credit card is accompanied with an annual fee which needs to be paid once in the lifetime of a card. The fee associated with each card varies. It usually ranges between 0 and Rs.30,000. The amount is usually billed in the card statement of the particular month. A number of card issuers have now introduced ‘zero or lifetime free’ annual fees or offer a limited period for with no annual fees.
When your application for a credit card gets sanctioned, most card issuers charge a joining fee which ranges from 0 to Rs.1 lakh. A credit card renewal fee is a predetermined amount which needs to be cashed once every year.
Charges related to finances
Most credit card companies offer an interest-free period to the cardholders. However, if you are unable to make timely credit card bill payments, an interest rate within 23%-47% would be charged to your account. The interest-free period becomes reactivated only after payment of the pending dues.
Fees for cash withdrawal
Cash withdrawal fees or cash advances fees are billed to your account if you withdraw cash from an ATM using your credit card. This fee is usually 2%-3.5% of the withdrawn amount or Rs.500, the higher of the two. The total amount to be paid is tallied from the day of the withdrawal until repayment.
Penalty for late payment
You can be charged with an overdue penalty if you are unable to make timely payments as per the bill statement or at least pay the minimum balance. Credit card issuers decide the value of the penalty depending upon the balance on the card.
Over limit-related charges
If you surpass the predetermined credit limit, you could be billed with an over limit penalty. The penalty could fall anywhere between 2.5%-3% for a minimum withdrawal of Rs.500.
Surcharge payment
In case of credit transactions, surcharge is the tax associated with goods and services. 2.5% is charged for railway-related expenditure and 1% or Rs.10 is charged for fuel-related cost. If the transaction for fuel exceeds Rs.400 or Rs.500, it is free from surcharge.
Charges for transactions in foreign currency
A conversion fee is applied if a credit card is used overseas. Credit issuers can charge up to 3.5% for an international transaction.t
Additional charges
A credit card is loaded with other charges such that are associated with deposits, delayed payments, fraudulent transactions and card replacement.
Bottom line
It is important to remember that, even though credit cards can be a helpful financial tool, it needs to be utilized responsibly. Factors such as delayed payments, outstanding dues and penalties can detrimentally bring down your credit score. The only way to enjoy the rewarding offers and benefits offered by credit cards is to make timely payments and regulate your credit card utilization.

How do I Convert HDFC Credit Card Purchase into EMI?

Even before converting your HDFC credit card purchase into EMI, ensure that the credit card purchase or transaction which you wish to convert into EMI is eligible for HDFC’s SmartEMI facility. You can check the same through your HDFC NetBanking account or by calling HDFC customer care, in case you don’t have an online banking account.

To check the eligibility of your HDFC transaction through NetBanking and to convert the same into EMI, follow the instructions mentioned below.

• Login to HDFC Bank NetBanking account.
• Click on ‘Cards’ from the main menu
• From the left side menu, Click Transact > SmartEMI
• Select credit card
• Choose transaction type as ‘Debit’ and click on ‘View’
• All the transactions eligible for conversion into EMI will be displayed along with an option ‘Click here to know your eligibility’.
• Click on the option corresponding to the transaction you wish to convert into EMI.
• Details of the EMI facility will be displayed
• Select the tenure in months to know the EMI details
• Check the terms and conditions box and click on ‘Continue’
• The SmartEMI details including loan amount, interest rate, tenure and monthly EMI will be displayed.
• If you’re okay with the interest, tenure and EMI, you can click on ‘Confirm’

The EMI facility will be approved immediately and the respective reference number and loan number will be displayed. The EMI will be effective from your next billing cycle and will be included in the minimum amount due.

What Lenders Look for When You Apply for Credit Card

When you apply for a credit card, there are multiple factors lenders consider before approving your application. Potential lenders always check your CIBIL score before issuing you a credit card. There are other factors that affect your credit card application such as your income, the organisation you work for, age, the city you reside in, and your payment history.

Factors lenders consider before approving your credit card application

• Credit score: Credit score is a 3-digit number that indicates your creditworthiness based on your credit history. Lenders check your credit score to analyse the risk and your repayment capacity. Your credit score can range anywhere between 300 to 850. A high credit score indicates that you are a financially trustworthy person in the eyes of the lender. If you have a low credit score, your credit card application may be rejected straightaway. Credit Information Bureau (India) Limited (CIBIL), one of the leading credit reporting agencies in India keeps a track of all your credit-related activities and issues your credit score. A credit report is a comprehensive document issued by the credit bureaus in India which list out all your borrowing and repayment history. There are many ways you can improve your credit score even if it is low currently.
• Debt-to-Income Ratio: A Debt-to-Income (DTI) ratio is determined by taking the sum of all your debt and dividing it by your income. Generally, your debt-to-income ratio should be less than 30%. If you have a high Debt-to-Income Ratio, any changes in your income level will put you in a financial crisis. So, if you have a high DTI ratio, consider closing one of your existing loans, clearing your Equated Monthly Instalments (EMIs), or paying off your credit card balance in full. Save the money you spend towards clearing your debt. This will lower your DTI ratio.

• Income and employment: If you have applied for a credit card, you would know that you have to submit your recent payslips if you are employed or your income documents if you are self-employed. Lenders analyse your employment and income details before issuing your credit card. While viewing your credit card application, lenders also check if your employment is stable.

• Credit Card Utilisation Rate: Apart from your payment history, your credit card utilisation rate is also an important factor that affects your credit card application. If you have multiple credit cards or had a credit card in the past, your credit utilisation rate can tell a lot about you. If you have over utilised your credit limit, your credit card application may be rejected. However, if you maintained a good credit utilisation rate, you would get a better deal on your credit card application.

• Delinquent accounts: If you have a delinquent account in your credit report, it could affect your credit card application negatively. A delinquent account is a credit account on which the customer hasn’t made the minimum due amount within the due day. When the account is 30 days past due, the credit provider will contact the customer to make the payment to restore the account. If the account is 90 days past due it will affect your credit score significantly. Before applying for a credit card, check your credit report and make sure you do not have any delinquent accounts.

Credit card application tips

• Before applying for a credit card, make sure you check your credit score and read your credit report. You can get a free copy of your credit report from each of the credit reporting agencies in India namely, TransUnion, Experian, and Equifax. You could also get a free copy of your credit report from one of the neutral financial advisory websites like BankBazaar.
• Close your existing loans if possible and lower your Debt-to-Income Ratio.
• If you have multiple credit cards, make sure you clear your credit card balance and maintain a good credit utilisation rate.
• Pay all your bills on time. This will increase your creditworthiness.
• Do not apply for too many credit cards or loans at the same time. The number of loan applications you submit has a negative impact on your credit card application.

If you have a low credit score or a high Debt-to-Income Ratio, make financially healthy changes and wait for few months before you apply for a credit card. Once you have made some changes like closing a loan or clearing your credit card debt, wait for a month for it to appear on your credit report.

New to Credit Cards? Here’s All You Need to Know

New to Credit Cards? Here’s All You Need to Know

So you’ve decided to take the plunge and get yourself a credit card. Unwrapping that shiny little piece of plastic opens you to a world of benefits and privileges. However, there are certain rules to live by if you want to avoid falling into a debt trap that could see your credit worthiness spiral downwards and make you a financial persona non grata.

A credit card gives you the freedom to spend money that is not debited from your bank account up to a certain sum for a fixed period of time. Thus, credit cards make credit available to you as and when you need it. The amount is to be repaid based on your billing cycle to avoid penalties and fines. While the initial rush of swiping your card everywhere you go might seem the way to go, here are some points to keep in mind so card debt does not loom on your financial horizon:

• Credit Card Charges:

A credit card usually comes with a whole list of Credit card charges, beginning with the joining fee. Additional charges include the annual fee, statement fees, service tax, surcharge, late payment fee, card replacement fee, etc. Exceeding your credit limit on your card will attract a charge as well. Delayed payment of your dues will also result in a penalty, which will be levied on your subsequent bill.

Not paying off the total amount due on your credit card will attract interest charges, which could be anywhere from 3%-4% a month. Doesn’t seem like much, you might scoff, but when annualised, the rate amounts to a whopping 48% on the higher end of the interest spectrum. This amount is also levied on each successive bill that has a balance carried over, which will inflate your overall amount due by a significant amount.

• Picking a Credit Card that Suits Your Needs:

Picking a credit card that suits your needs is important, as this could be the deal breaker between you enjoying the perks of a card and drowning in a sea of debt. If you’re looking for a card merely to help you keep up with payments and aren’t looking for any perks, a no-frills card is the best bet for you. Looking for discounts each time you swipe at a store? A shopping credit card that offers cashback or in-store rewards is the one for you. Frequent travellers can benefit from a travel card, which converts points into air miles redeemable on flights or hotel stays.

• Dates to Remember:

With your new credit card comes a host of important dates that you have to keep in mind, such as your bill payment date, the date the bill is generated etc. The date your bill is generated on marks the end of your billing cycle and lists your outstanding dues for that period only. The bill payment date is the date by which you are expected to pay off the outstanding amount or the minimum amount due to avoid late payment charges.

• Credit Card Application Status
  Different banks have different ways of credit card application status but most of them have an online facility, where you can apply for a credit card online as well. The process then involves furnishing all required documents and information to the bank. Once, the application process is complete, you must track your application status to check how far long has it been processed by the bank so that you can follow up with the bank accordingly. Usually, it takes up to three weeks to receive your credit card from most banks. Credit card may take a month from the date of registration, as it undergoes processing request, followed by dispatch to your home address.
  

• Minimum Due versus Full Payment:

Credit cards offer you the chance to pay off your debt in instalments, either before the due date or after it. It is always advisable to pay off your outstanding amount by the due date to keep your credit score and repayment history healthy. However, if you are unable to pay off the whole amount, you are required to pay a minimum amount, usually a percentage of your total outstanding amount.

Getting away with paying just the minimum amount brings with it a set of charges though, since you will be paying interest on the balance amount. You will also lose out on the interest-free period, meaning every successive transaction will incur interest from the day the purchase is charged to your card.

As seen above, there are quite a few pitfalls associated with credit cards that, if you aren’t careful to avoid, could leave you in debt for a considerable amount of time. Being prompt with payments, avoiding maxing out your credit card and being prudent with what you charge to your card will ensure that you reap the many benefits that come with credit cards.