Get Smart Tips on how to Choose the Best Credit Card for your Daily Expenses

It took a while for Indians to get used to the cashless economy, but the prompt of demonetization helped the Indian economy and society to explore digital payment and transactions. Though debit cards/ATM cards were already in circulation, their use was somewhat limited. Nonetheless, with the Reserve Bank of India strongly rooting for digitization and transparency in currency transactions, both within India and with Indian connections abroad, India had no choice but to embrace the western trend of paying with plastic. Credit cards come with many rewards to tempt users to enable their use. They are tied with rewards, and not just general discounts when you shop at retail outlets, but with cashback features anywhere between 5 to 15% when you buy big-ticket items like a refrigerator or a washing machine.

You can also avail of low-interest rates on loans when you use your credit card to buy items on EMIs. Credit cards come with costs too, not least high annual fees and joining fees. You can use your credit card as an ATM or cash card as well, but you will be charged for the transaction, called a credit card cash advance fee. This can be anywhere between 2%-3% of the amount of the transaction, and the minimum amount may be set as high as 500 INR on some premium credit cards.


Credit cards used for retail


The Reserve Bank of India has stated that most people in India, in 2019, used credit cards in the retail segments, like buying groceries and paying utility bills. It's a convenient way to pay, even for things of daily use, such as household items. The growth in the number of outstanding credit cards in the period between February 2018 and February 2019 was at 25%. In the same time span, transactions at ATMs, using credit cards, increased by 15%. Many people in India mistakenly believe that the amount of cash withdrawn can be repaid in the interest-free credit period. This, however, isn’t true.


The interest levied at ATMs


Depending on credit card types, interest levied ranges from card to card. When you withdraw cash at an ATM by using your credit card, even if it's the most basic type of card, you will not get an interest-free window of around 45 days like you do when you use it to purchase goods at merchant outlets, not on most cards anyway. Instead, you will be charged interest right from the moment you make the withdrawal at the ATM. Cash withdrawals with your credit card don’t yield any reward points as you would get at a retail outlet.


The amount you may withdraw at an ATM with your credit card will be capped at a limit of a percentage of your credit card limit. Entry-level cards that people get issued for daily expenses may have cash withdrawal limits of 10%. Premium cards usually have a limit of 30%. Still, people continue to use their credit cards to withdraw cash. In June 2020, after the lockdown was nearly halfway through, people used credit cards and debit cards to withdraw cash from ATMs to the tune of Rs. 1 lakh crore.


Cards for everyday living


Credit card types are plenty. You should choose one that is the right fit for you. Average salaried people want to use credit cards for regular purchases, and the odd appliance on sale. They don’t have high-end demands, so a credit card that they can use to pay their daily expenses suffices. The best credit cards for this kind of use would be the cards that banks like SBI offer (SBI Simply Click), or by finance companies like Bajaj Finserv, which offers co-branded credit cards. HDFC Bank’s Regalia First is also a good pick. ICICI Amazon Pay Card is great for online shopping on Amazon, and you get everything on the e-commerce portal to meet your daily needs.

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