Are you applying for a first credit card? You might have many questions and concerns regarding their use and how to choose the card best suited to you.  In many developing economies, like India, credit cards are becoming increasingly popular because of their convenience and ease of use. You can use a credit card to buy anything from jewelry to groceries. Having a credit card means that you do not need to carry around cash with you at all times to make purchases. It is a safe and convenient method of payment.

 In very simple terms, a credit card

1. Allows you to borrow money from the bank on a monthly basis to make purchases. When you buy something using your credit card, you are using your credit card issuer’s money on loan – for free-  until you pay off the amount when you get your credit card bill at the end of a month

2. Allows you to make cash withdrawals from an ATM in case of an emergency – i.e. if you in a foreign country, or do not have your ATM card with you, or do not have time to go to the bank to withdraw cash from your account, you can use a credit card to make a cash withdrawal from an ATM machine.

What is the best kind of first credit card/beginner credit card?

There are several options for a first credit card. If you have absolutely no credit history – i.e. if you have never taken a loan or credit card, then it might be difficult to get approved for a first credit card with absolutely no credit background. In this case, a secured credit card might be a good option. A secured credit card works just like a credit card except that you need to make a fixed deposit in order to get a secured card. The bank uses the deposit as collateral in case you default on your payment.

 A secured credit card is typically used by people who cannot qualify for a regular unsecured credit card either because they have bad credit or because they do not have a sufficient credit history. Even people with bad or no credit can get a card as the bank is safeguarded against default. It is a simple and quick way to improve your credit score and build your credit history, provided you make all your payments on time.

How to get approved for a first card

Credit card issuers like to see a long credit history so that they can judge if you are a low risk or high risk customer.  If you have a minimal credit history, then apply for a ‘secured credit card’ to ensure that you can first build your credit before applying for a regular credit card.

If you have already taken loans and have a good credit record, then you can apply online or in person at the branch, once you have researched the various offers available.

Make special note of the following when making your decision:

-   Interest rate

-    Joining fee

-    Annual fee

Make sure you have a credit score of at least 750 to maximise your chances of being approved. If you have a low score, take time to improve it before you apply for a card.