Applying for your first credit card can be a daunting task. After all, there are hundreds of credit cards available in the market and numerous terrifying stories about misusing them. However, credit cards are powerful financial tools that not only help you to build a strong credit history but if used rationally they can benefit you in numerous ways. If you are taking the initial step toward applying for your first credit card, here are a few important things to remember.

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1. Types of Credit Card

It is very important for you to know the different types of credit cards in India. For example, if you are new to credit cards, you can opt for a beginner-level credit card with a low annual fee.

2. Your Income

The credit card issuers will ask for your income information in order to check your repayment capacity. Your income plays an important role while applying for a credit card. This is proof to the issuer that you will be able to pay your credit card bill.

3. Start with Low Credit Limit

Initially, the credit card issuers will often provide you with a low credit limit to minimize the risk. Once you get accustomed to managing your credit card, the issuers themselves will provide you with the option of increasing your credit limit.

4. Important Credit Card Terms and Conditions

It is important to know about all the terms and conditions as they contain information you agree to when you use the card. Do read about the card’s APR range, the applicable fees, how rewards work, and all the other significant details.

5. How does Interest Apply?

In case you repay your credit card balance timely and in full, you will clearly be using the bank’s money for free as you need not pay any interest charges.

6. How does the Grace Period Work?

A grace period is a time during which the issuer doesn’t charge any interest on the purchases made if you pay off the new balance in full and before the payment due date.

7. Fees and Charges Related to the Credit Card

Make sure you check all the important fees and charges related to the card. The things you need to keep a check on include joining fee, annual fee, finance charges, transfer fees, cash advance charges, foreign transaction fees, over-limit fees and more.

8. Penalty on Late Payment

You need to know about the fee you can incur on paying off your balance later than the supposed payment due date.

9. Balancing your Credit Utilization Ratio

It is significant to keep a check on how much you are spending irrespective of your credit limit. The credit utilization ratio also affects your overall credit health hence a higher utilization ratio cannot be considered good even if your repayment history is decent.

10. Understand how Credit Cards can Affect your Credit Score

The credit card impacts your credit score as it defines your financial decisions and management of debt. If you overcharge your credit card by spending beyond the given credit limit, credit cards can have a bad impact on your credit score.