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10 Things You Should Know Before Applying for a Credit Card

Do you want to apply for a Credit Card? Credit Cards have different aspects. Don’t apply for credit card before checking out these 10 points.

Do you want to apply for a Credit Card? Credit cards make our life very convenient. It increases our purchasing power and also comes with attractive offers. Applying for a credit card is now easy and is a paperless process. Many banks allow their customers to apply credit card online from their mobile banking application or internet banking portal. One such credit card is 811 #DreamDifferent Credit Card that Kotak 811 customers can apply online through the mobile banking app.

While it is tempting to get a credit card, you should about a few aspects of credit card before applying a credit card.

Check out different bank credit cards.

1.Credit score

Credit score is a three-digit number that reflects the creditworthiness of an applicant. The creditworthiness is the ability to pay back the debt. Various factors influence the credit score. These factors such as payment history, credit utilisation, credit history length have different weightage on the credit report. Credit bureaus like CIBIL assign credit score to individuals on these aspects. The credit score is build when you apply and pay your dues applicable on credit cards or loans. A good credit score is important to apply for credit cards and loans.  Also, many employers check the credit score of the applicants before offering a job.    

2.Type of Credit Card 

There are two broad categories of credit cards: secured credit card and unsecured credit card.

Secured credit cards:

Customers can avail secured credit cards against collateral such as a Fixed Deposit (FD). These cards are also called credit cards against FD. To request for this credit card, you need to book an FD of the required minimum amount.  Individuals don’t have to submit their income report to avail this credit card. Banks don’t consider credit score like CIBIL while offering the credit card. Hence, it is easy to apply and individuals with no credit history can apply credit card against FD online. 

Unsecured credit card:

No collateral backs unsecured credit cards. Hence, banks offer unsecured credit cards to individuals with a good credit score.

So, if you don’t have a credit history or want to repair your credit score, secured credit cards will be a good place to start.

3.Credit Limit

Every credit card comes with a credit limit. The credit limit is the maximum amount you can spend using your credit card.

Typically, the credit limit of a secured credit card is 80% of the fixed deposit. E.g. for an FD of Rs.15,000, the credit limit of the card will be Rs.12,000.

In case of unsecured credit card, the credit limit will depend on the eligibility. The credit limit may change based on payment history. Banks may increase your credit limit if you pay on dues on time.

4.Joining and Annual Fees

Credit cards have joining fees and annual fees. The joining fee and annual fees of credit cards vary. Joining fees is the onetime fee that applicants need to pay to avail the credit card. From time to time, banks waive off the joining fee.

Annual fee is the annual maintenance fee that customers need to pay every year for using the credit card.

Credit cards against fixed deposit like Kotak 811 #Dream Different Credit Card don’t have any joining fees or annual fees. You can click here to know more.

Related Article: Are you looking for a credit card with no annual fees?

5.Interest Rate

Most credit cards come with a free interest period of around 40-50 days. You don’t need to pay interest on the transactions done during that period. However, if you haven’t paid all your outstanding dues within the stipulated time frame, pay interest on the outstanding balance. Credit card companies usually charge a monthly interest rate of around 2% i.e. 24% annualised interest rate.

If you are not careful, interest on the balance can quickly spiral out of control. Hence, it is important to pay your bills on time without fail.

6.Late payment charges

If you don’t pay the required minimum amount before your due date, banks will levy late payment charges. Late payment charge will depend on your outstanding balance. The higher outstanding balance, the higher will be the late payment charge.

Late payment hurts your credit score. So, pay your dues on time.

7.Over Limit Charges

As discussed above, every credit card has a credit limit. Few credit cards let their customers to exceed their credit limit. They will charge you for exceeding the credit limit. This charge is called over limit charges. The over limit charge is a flat fee that will show on your credit card statement.

Exceeding your credit limit will harm your credit score.  

8.Credit utilisation rate

Credit utilisation rate is also an important aspect that you need to keep in mind while using credit cards. The credit utilisation ratio is the credit card balance divided by your total available credit limit. Keeping a low credit utilisation ratio will help to improve your credit score.

Having two or more credit cards will help to keep a low credit utilisation rate.

9.Offers and other benefits

Credit cards companies come with a lot of offers and other benefits. Co-branded credit cards where credit card companies tie up with different organisations offer higher benefits when you use their card to make any purchase from their store.

Hence, it is essential to check the benefits and offers available on the credit card before applying for a credit card.

10.Cash Withdrawal

During an emergency, you can use your credit card to withdraw cash. However, the cash withdrawal structure of different credit cards will vary. Credit card companies allow their customers to withdraw up to 90% of the credit limit with no interest for up to 48 days. However, a standard processing fee for the cash withdrawal will apply. So, keep a note of these aspects.


In today’s world, Credit Card is an important tool. There are several advantages and disadvantages of credit cards. If used wisely, credit cards can build credit score and save money.

Credit cards also come with a lot of fees and charges. So, to make the best use of your credit card, check these 10 points before applying for a credit card.

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