First-Time Credit Card Applicant: 10 Things to Know Before Applying for Your First Credit Card

Posted on Thursday, May 16th, 2024 | By IndusInd Bank

Being eligible for a credit card is a milestone as it signifies that you have met certain conditions for banks to trust you with credit. To improve your credit score and have a better chance for credit approval, understanding all the minute credit card-related details is essential.

Ten Things You Must Know Before You Apply for a Credit Card

Credit Card Basics           

Understanding credit card basics is essential before applying for your first card. A credit card is a financial tool that allows you to borrow money from a bank up to a predetermined limit, which you have to pay back within a specified time. If any balance remains unpaid by the due date, interest will be charged. Fees, such as annual fees or late payment fees, are generally associated with credit cards. There are credit cards with great offers and attractive fees. As a first-time credit card applicant, familiarise yourself with the terms and features of credit cards, including interest rates, fees, credit limits, and rewards.

Also read: Who is eligible to apply for a Credit Card?

Creditworthiness

It is a good idea to keep an eye on your credit score, as lenders often use it to assess your financial history and determine your eligibility for credit. Checking your score before applying for credit can help you better understand your financial standing and make any necessary improvements to increase your chances of being approved.

Rates and Fees

Credit card fees define affordability; hence, learning and understanding them is necessary before you apply for a credit card. It is wiser to let go of a few reward schemes or offers in exchange for lesser fees.

Also Read: Exploring IndusInd Credit Cards and Their Exclusive Benefits.

Checking the Eligibility Criteria

Checking credit card eligibility involves assessing if you meet the card issuer’s criteria. Key factors include minimum age, income, credit history, etc. Understanding requirements beforehand helps you apply for cards aligned with your eligibility, reducing the risk of rejection and negative impacts on credit.

Interest on Credit Cards is Avoidable

Interest is charged for lending credit. You must understand that interest charges can be high, and credit bureaus monitor your credit usage and repayment schedules to provide credit scores. You can avoid the interest charge by paying the outstanding amount in full by the due date. Doing this allows you to use credit for a grace period and have no interest payout.

Making Timely Payments is Wise

Everyone has a sea of expenses in today’s age but might not necessarily be able to cover them all the time. Hence, prioritising your expenses and spending smartly should become a habit of yours. One of the top priorities of expenses should be credit card bills if you have one. Furthermore, this payment should be made timely each month to avoid late fees and negative impacts on your credit score.

Paying Late Fees is Damaging

When you miss the due date of a credit card payment, you incur late fees, penalties, and monetary damages. You also suffer reputational damage. Your credit scores are impacted, and your ability to get further loans is also affected. Hence, be vigilant and never miss the due date of payment.

Utilising Entire Credit Card Limits Affects Your Credit Score

The credit card utilisation ratio refers to the credit usage percentage. So, say you have a limit of ₹ 50,000. Credit bureaus consider it as good debt management if you consistently have an outstanding below ₹ 15,000 (i.e., 30%).

Understand How to Improve your Credit Score

For first-time credit card users aiming to improve their credit scores, it is crucial to make timely payments, avoid consuming the entire credit limit, and avoid maxing out the credit limit. You may start with a low credit limit, monitor spending closely, and only apply for additional credit when necessary to minimise inquiries.

Conclusion

If you are about to apply for a credit card for the first time, remember that it is the beginning of debt, so being aware of spending is paramount. By understanding the terms and conditions, practicing responsible spending habits, and staying informed about interest rates and fees, first-time applicants can embark on their credit card journey confidently.

Click here to get an instant credit card from IndusInd Bank.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.