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Types of Credit Cards in India – How to select the right credit card?

  • Rudri Rawell
  • Oct 23 2021
  • 7 minutes
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Credit cards have become an essential accessory for most people who have a reasonable level of disposable income. Credit cards come in many varieties, including basic cards that offer reasonable credit limits to premium cards that offer benefits to users who have a high-flying lifestyle. There are also credit cards for regular salaried individuals, for frequent flyers, students, travellers, the cautious users, etc.

Different credit cards come with different features and benefits. Choosing one card can depend on individual needs and expectations. For example, frequent flyers can benefit from a credit card that is co-branded with an airline. Here, we have gathered information on different types of credit cards that are commonly available in India. 

Read on to know the basics of different types of credit cards and how you can choose one that’s right for you.

Different types of credit cards in India

Listed here are the different types of credit cards available in India:

Types Description
Credit cards for first-time users These cards offer regular features and generally do not have any added perks. These may charge a low annual fee.
Credit cards for low-income earners These credit cards charge low to no annual fee. The benefits in these cards are as per the user’s budget or affordability.
Travel credit cards Travel cards come with extra benefits on travel like lounge access, rewards on travel, co-branded privileges, etc.
Shopping credit cards These cards offer the most value back to frequent shoppers. Key features include rewards/cashback on online and offline shopping.
Airline credit cards Mainly launched in collaboration with an airline brand, these cards let you save more on air travel
Rewards credit cards These cards offer generous rewards for various spendings combined with accelerated rewards on specific expenses.
Cashback credit cards These credit cards offer direct cashback instead of rewards.
Fuel credit cards Meant for individuals who travel by road, these cards help in saving through discounts, extra rewards and fuel surcharge waivers.
Entertainment credit cards These cards offer entertainment benefits through discounts on movie tickets, buy one get one free deals, etc.
Secured credit cards These cards are normally offered against fixed deposits. These are ideal for those who find it difficult to get a regular card, for example, people with low credit scores.
Lifestyle credit cards This credit card offers benefits for spending on lifestyle needs such as nightlife, fashion shows, premium restaurants, etc.
Premium credit cards Premium credit cards are meant for select customers. These provide free access to golf clubs, airport lounges, concierge service, etc. Some cards also offer complimentary travel and hotel accommodation coupons. Certain premium cards may also have a personal relationship manager for managing the cardholder’s assets. 
Co-branded credit cards Tie-ups between banks and brands result in co-branded cards that offer special discounts and deals on transactions made with the brand. While users can make other transactions using the card, they may not be very profitable. These cards are generally offered to increase the brand’s customer base.
Student credit cards These cards are designed for college students. The approval for a student credit card has less stringent criteria since students often lack credit history. These cards also have a lower interest rate to make them affordable for students.
Business credit cards These cards are designed exclusively for business use to make sure that business and personal expenditure can be segregated. These require applicants to have a good credit history since the card issuer considers the applicant accountable for timely bill payments.
Prepaid Cards Prepaid cards require users to load money before using them. Every transaction made from the card results in reduction of card balance. The card does not have any finance charges or minimum payment criterion.

How to select the right credit card?

To ensure correct card selection and appropriate utilisation, here are a few points that card users must consider while applying for a credit card:

1.Consider spending patterns 

One of the most important considerations while applying for a credit card is an individual’s existing spending pattern. If an applicant rarely travels internationally, then it may not be sensible to get a premium travel credit card. The card selected should be such that one can make the most of it as per spending patterns without having to pay hefty annual fees.

Recommended read – 6 top tips to improve your credit score

2.Individual financial needs 

Asking yourself why you need a credit card is another critical aspect to consider. Is the card required to build a credit score? If yes, then getting a zero annual fee credit card may make sense. Is it needed to transfer the outstanding balance on existing credit cards? Then a credit card with the lowest interest rate is a better option.

3.Do your research 

While exploring all the credit card options available, try to conduct some basic research on credit cards of choice. While you don’t have to go through every credit card site, you can search for the right credit card and review/compare a few that may fit the bill.

4.Specific category benefits 

If you go for a category-specific card, for example, a travel credit card, select the one that offers extra benefits on it. For instance, certain credit cards come with emergency overseas hospitalisation cover, air accident insurance, etc, apart from the usual benefits.

Conclusion

There are numerous credit cards available in India. Thus, it is up to you to select the right credit card wisely. Be clear about your needs, do some research and then select the right card and understand all terms around a credit card like the minimum amount due, credit limit, etc . While using the credit card too, it is best to be judicious about spending habits such that you do not end up in a debt trap in the long run.

FAQs

  1. Is getting a credit card a good idea in India?
    Credit cards offer various discounts and deals that can provide unique benefits as compared to other financial products. Judicious users can make the most of credit card benefits in India without falling into a debt trap.
  1. Do I have to pay if I don’t use my credit card?
    Depending on the specific terms of usage of a credit card, you may have to pay annual fees even if you do not use the card. However, this differs across credit card categories. If it incurs charges, it may be good to close a credit card.
  1. What is the proper way to use a credit card?
    The right way to use a credit card is to keep the credit utilisation ratio within 30% and make timely bill payments. This helps in improving your credit score and fetch lower interest rates in the future.
  1. What is a supplementary/add-on card?
    A supplementary/add-on card is one or more credit cards issued to the primary cardholder’s family members. Add-on cards and primary cards share the total credit limit and features of the primary card account. 
  1. What are reward points and how can I use them?
    Reward points can be earned whenever you make a purchase using your credit card. These can be exchanged for a range of freebies and discount vouchers, depending on the terms of the credit card.
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