When we think of credit card usage we find that different people manage it in different ways. Some people are highly disciplined and never default on their monthly payments and others are so messy that they are always on the top of the defaulters list.
The credit card companies provide credit cards with different properties like different interest rate, different reward structure, different credit limits etc. If you know how you tend to deal with credit it gets easier to choose the best combination for you. Let’s find out the kinds of credit personalities that exist and what card can suit you.
The beginner
You are just out of college enjoying your first job and you never had surplus cash before and hence no financial planning was required. You have never utilised credit previously and you are very excited about the very concept of a credit card. As expected, you are in a hurry to apply for one. For beginners it’s advisable not to go for cards with a high credit limit. Your financial wit has never been tested so better be cautious. Once you are sure that you can manage your finances well, you can go for credit cards with a higher credit limit. Example: Indian Bank Bharat Card
The disciplined scrooge
You never default on your payments and never spend beyond your means. Reward offers don’t alter your spending pattern and you plan every move before executing. For the disciplined the best suited card is one with cash back facility and a good reward structure. The reward points should accrue irrespective of the type of purchasing done and can be redeemed at one go. The interest rate on your card doesn’t matter much as you always pay on time.
Example: Citibank Cash Back Card (Assured cash back every time you swipe your card), ICICI Bank Credit Card and SBI Silver Card
The carefree
You love spending and believe that spending is the motivation for you to earr more. You plan things beforehand but don’t mind going overboard at times. You cross your spending limit at times and end up in situations where you don’t make full payments on your credit card. The most important property, which the carefree should look for in a credit card, is the interest rate. As you carry forward the balance your interest expense is going to be high.
It’s advisable to choose a card which offers the lowest interest rate. You should also check for no annual maintenance charges as well. Example: Axis Bank Easy Plati-num/Gold Credit Card
The topsy turvy
You don’t understand abc of financial management. Almost every time you don’t even pay the minimum amount due on your credit card. You always end up paying heavily in interest and late payment charges. For you a prepaid card is the best bet as it will save a great amount of money, which you pay in the form of interest and various charges. Example: SBI EZ-PAY CARD, HDFC GiftPlus Card, ICICI Gift Card
The Credit Paranoid
You never wanted a credit card in the first place. You applied for the card just because it made your life easy in some scenarios like booking air tickets and overseas purchases. The best card, which will suit your needs, is the one with no annual maintenance charge. You never make late payments and you are not a frequent user so interest rate and reward structure of the card doesn’t matter much for you. Example: ICICI Bank Preferred Silver Credit Cards, Axis Bank Gold Credit Card, Bank of India Classic Card, ICICI Bank Cash Gold Credit Card.
The writer is CEO of BankBazaar.com