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10 Things to Consider Before You Apply For A Credit Card

Mar 9, 2020 7:37 AM 9 min read

You walk into a mall and see the perfect pair of shoes. Alas! It's the month-end and you are running short on funds. Or your car suddenly breaks down and the engine requires an expensive remake. Or perhaps the premium watch you have been eyeing for so long is finally back in stock but you are cash-strapped at that time.    


It is at times like these that a credit card can come in handy. 


A credit card is a financial instrument, which lets one borrow funds from a pre-approved limit to pay for one’s purchases. Credit card issuers give issuers give short term credit for 45-55 days, following which they charge a monthly interest.


Credit cards are an attractive mode of payment as they let you buy first and pay later. In case you are to face a financial crunch, a credit card would allow you to pay for any emergency expenses. Moreover, by using credit cards to pay for your transactions, you can also earn reward points, which can be redeemed on gifts and vouchers, among other attractive benefits.


Akin to a debit card, a user can swipe a credit card to make a payment or use it for online transactions.



How is a Credit Card Different From a Debit Card

The primary difference between a credit card and a debit card is that when you swipe a debit card, the money gets deducted from your bank account; whereas, in case of a credit card, the money is borrowed from a pre-approved limit (hence the names Debit and Credit!)


10 Things to Consider Before You Apply For A Credit Card


Why Should I Apply for a Credit Card

Want to apply for a credit card? Here's a look at some benefits of having one:


When in Need

 A credit card can come handy in case of a financial emergency. It can act as a safety-net, allowing the user to cover up for a short-term budget crunch.


A credit card also lets you make a large purchase and pay it in smaller amounts over a period of time. 


Improve Credit Score

Credit score is a numerical expression that represents the creditworthiness of an individual.


Lenders, such as banks and credit card companies use credit scores to evaluate the potential risk posed by lending money to consumers, to determine who qualifies for a loan, at what interest rate, and what credit limits. 


Responsible use of one’s credit card can help one build a robust credit score, which can prove to be beneficial when applying for a loan.



Many credit cards give you rewards, including cashbacks, discounts, lounge access and more. 


We shall take a quick detour here to delve into some types of credit cards, based on their rewards, which are up for grabs.


10 Things to Consider Before You Apply For A Credit Card


Types of Credit Cards

Reward Credit Cards

This type of credit card comes with accelerated reward points on specific purchases and transactions. 


Bonus points earned can be redeemed for discounts on future purchases, or to reduce your monthly credit card bills.


Some top reward credit cards in India include Yes Prosperity Rewards Plus Credit Card, HSBC Smart Value Credit Card, HDFC Bank MoneyBack Credit Card and Citi Rewards Card


10 Things to Consider Before You Apply For A Credit Card


Travel Credit Cards 

These can help you enjoy discounts on all airline ticket bookings, bus and rail ticket bookings, cab bookings, and more. 


Reward points are earned on every purchase. These can be redeemed to earn air miles which can be used to avail discounts on future bookings, get complimentary access to VIP airport lounges and more.


Some top travel credit cards in India include HDFC Bank Superia Credit Card, Axis Bank Miles & More World Credit Card, Air India SBI Signature Card, Yatra SBI Card.


Fuel Credit Cards

Fuel credit cards can be used efficiently to reduce one’s total transportation costs by availing fuel surcharge waivers. Fuel purchases made with such credit cards can also help earn extra reward points. 


IndianOil Citi Platinum Credit Card, IndianOil HDFC Bank Credit Card, Kotak Delight Platinum Credit Card are some top fuel credit cards in India.


Shopping Credit Cards

These partner with stores online or offline to give users lucrative cashbacks, discount vouchers on transactions.


Some top shopping credit cards in India include SimplyCLICK SBI card, HDFC MoneyBack Credit Card, Amazon Pay ICICI Bank Credit Card, American Express SmartEarn™ Credit Card.


10 Things to Consider Before You Apply For A Credit Card


Secured Credit Cards

A secured credit card is one that is backed by a payment, such as against Fixed Deposits, which is used as collateral.


A secured credit card is usually offered to customers who do not have a credit history or have a limited credit history. These secured credit cards are issued only after a certain amount is paid to the bank and that amount usually acts as the credit limit of the card, helping customers build their creditworthiness.


You can pick any one or more types of credit cards depending on your need and spending pattern.


Axis Bank Insta Easy Credit Card, SBI Unnati Credit Card, ICICI Bank Instant Platinum Credit Card are some popular secured credit cards in India. 


Eligibility Criterion When Applying for Credit Card Online/Otherwise

Are you looking to apply for a credit card online and seeking instand approval? Below are some points you might want to keep in mind when you apply for a credit card online or otherwise:


Credit Score

Banks check a customer's credit score at the time of application, which outlines the customer’s credit history, payment history, and payment defaults, if any.


Credit Utilization Ratio

Credit Utilization Ratio is the ratio between the credit card bill and the credit limit. Hence a customer who spends more will have a higher credit utilization ratio. 


Now while different credit agencies have different cut-offs to determine the ideal credit utilisation ratio, it is usually recommended to have a total credit utilisation ratio below or equal to 30%.


A customer who tends to spend too much or overspend on his/her card is likely to face rejection/delay in the application approval process.


Needless to say, credit utilization ratio comes into play when applying for the second/multiple credit cards. 


Credit Card/Loan Application

Customers who apply for multiple credit cards or loans at a time are often seen as credit hungry by the issuer and hence are less likely to have their applications approved in a timely manner.



Wondering if a student can apply for a credit card? Maybe not, as many credit cards have an income criterion. Customers must earn a certain amount to be eligible for such credit cards. It also acts as a primary determinant of the credit limit assigned to the user.


However, it is rather interesting to note here that PayPal-owned money sending app Venmo is reportedly prototyping a new feature that would allow adult users to create for their teenage children a debit card connected to their account. The prototype card called “Delegate” could potentially let parents set spending notifications and limits while giving kids more flexibility in urgent situations than a few dollars stuffed in a pocket.



Only Indian citizens or Non-Resident Indians (NRIs) can avail an Indian credit card.


You can go through the minimum age and income requirement sought by some top credit card providers in India here.  



Most credit card issuers have a minimum age limit of 18 years old and maximum limit of 65 years. 


Annual Fees

Many credit cards, especially the ones with exclusive benefits, such as SBI Card ELITE, HDFC Bank Diners Club Black Card and American Express Membership Rewards Credit Card can charge anything between ₹5000 to ₹10,000 as the annual fee or the 1st year fee. 


Some others like IndusInd Bank Platinum Credit Card, HSBC Visa Platinum Card and Axis Bank My Zone Credit Card are lifetime free credit cards.


There is yet another category of credit cards - one that charges an annual fee initially but waives it off eventually after the user crosses a set limit. 


For instance, State Bank of India’s (SBI) SimplyClick card charges an annual fee of ₹499, which is reversed if you spend ₹1L through the card in a year. HDFC Freedom Credit Card charges ₹500 as annual fee but waives it off after you cross the ₹60,000 spending threshold in a year.


Joining Points

Credit card providers offer welcome benefits or sign up bonuses to attract customers. They can be in the form of air miles, cashback, vouchers and so on. 


Here is a handy list of some top credit cards that offer lucrative sign-up bonuses.


10 Things to Consider Before You Apply For A Credit Card



Reward points are points that are rewarded to a user following a transaction they make with their credit card. These incentivise customers to make more purchases using the card. 


These reward points can later be redeemed or exchanged for vouchers, select product/brand purchases, payment of annual fees, cash back on future purchases, air miles and more. Certain banks also allow card holders to donate their reward points to charity.


The reward system depends on the issuer. While you can earn 2 points for every ₹200 spent on a Axis Bank Neo Credit Card, a Citi Rewards Card will fetch you 1 point for every ₹125 spent. 


View how much you can reward you can earn while spending on your credit card here.



As discussed at the very beginning of the article, credit card issuers give free credit for 45-55 days, following which they charge a monthly interest.


A credit card bill will show the total amount due, minimum due amount (generally about 5% of the total amount of the bill) to the lender/issuer and the due date.


Now one can either pay the total amount due in full or pay only the minimum due amount and repay the outstanding amount over a period of time. However, in this case, the outstanding amount will attract interest charges.


Read how interest is calculated on a credit card.


Issuer vs Network

As a user, one might not be much affected by the credit card network. However, it might help to know the difference between an issuer and network, especially considering that some cards like that of American Express and Discover might not be accepted by all merchants.


A credit card issuer is the bank/NBFC that issues you credit card. Axis Bank, ICICI Bank, Citi Bank are some of the best credit card issuers in India. On the other hand, credit card networks act as the bridge between the card issuers and the merchants. Major credit card networks in India include Visa, Mastercard, American Express, Discover and RuPay.


It is worthwhile to note here that American Express is a network as well as a card issuer, while most other issuers depend on Visa or Mastercard.


One or More?

While a credit card can very well come handy during situations of financial emergency, lot many customers still consider them as debt-traps. Even those who already possess a credit card are often wary of applying for another one, overcome by the fear of accumulating unmanageable debt.


Know the pros and cons of having multiple credit cards


All set? Here is some quick piece of advice before apply for a credit card


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