#1 Why are you applying for a credit card?
If the reason is to build your credit score, you must ensure that you use your credit card responsibly. You must pay all the dues every month and refrain from using the card to purchase things which you may not be able to afford otherwise. Remember, whichever mode of payment you use to pay for your expenses and spend on luxuries, you must spend within your budget.
#2 Do you have the capacity to repay the dues on time?
When the monthly bill is generated, credit cards offer the option to make a minimum payment, which usually is 5% of the outstanding amount. You may avoid penalties by paying the minimum amount, but you will still have to pay interest on the balance amount. This interest can be as high as 40% per annum! Also, only paying the minimum amount repeatedly can lead to a huge debt trap. Hence, if you do not have the capacity to repay the complete outstanding amount, stop using your credit card.
#3 Can you maintain your credit utilisation ratio?
The credit utilisation ratio is the ratio of the total credit utilised by you out of the total credit limit offered. If you are getting a credit card, it is absolutely important to keep a tab on how much you are spending out of the total credit limit offered by the credit card, as this may affect your overall credit health. Ideally, you must avoid utilising more than 30-40% of your total credit limit.
#4 What are the rewards offered by the credit card?
Most credit cards offer various rewards that are spread across different sectors. These rewards could be on flight tickets, hotel bookings, dining rewards, gift cards, cashback, etc. So, if you are applying for a credit card, look for one that offers rewards suited to your needs. Also, make note of the expiration date of these rewards and redeem them accordingly.