Credit Cards

The 6 Best Credit Card Rewards Programs in India 2016

These Are The 6 Best Credit Card Rewards Programs in India

A recent survey (sample size: 654) done by an online Financial Blog has revealed the names of the top 6 credit cards in the country. The cards are listed below in order of popularity.

  • HDFC
  • Citibank
  • SBI
  • Standard Chartered
  • HSBC

Credit cards were ranked on 6 parameters: interest rate, annual fee and other charges, rewards and offers, customer service, convenience of paying the bills, and ease of applying for the card.

The participants were requested to rank each card on the scale of 1 to 5 on each of these 6 parameters. The average score of a card was taken as its total overall score.

Before we check the performance of each card on various parameters and their final scores, let’s understand why before applying for a card it is necessary to evaluate it on the aforementioned 6 factors.

6 factors to look at before applying for a new credit card

Truth number one: not all credit cards are equal.

Some credit cards are better than others, and having one of them may mean not only better customer service but also favorable interest rate and lower annual fee. In short, a little research helps you save money.

Here are the top 6 factors to look at in credit cards:

  • Interest Rate 

Truth number two: even a small increment in the monthly interest rate translate into a substantial extra payment over time

The interest rate can vary from 1.99% to 3.5% and is an important factor to consider when applying for a new card. The interest rate charged doesn’t come into play if you pay your payments in full all the time.

However, it can have a huge effect when you report high credit card utilization (credit card utilization is the percentage of the card’s maximum limit you use) and carry the balance over to future payment cycles. Even a small increment in the interest rate can make a huge difference, as the following example illustrates.

An interest rate of 1.99% translates into 27% yearly CAGR (Compound Annual Growth Rate), while the figure for an interest rate of 3.5% is 51% yearly CAGR.

Yes, that’s right—51% CAGR!!! That is, a debt of 1 lac INR will become 7.9 lac INR in as little a time as 5 years if you don’t pay it.

An Important Lesson: Not paying your balance in full on time coupled with a high interest rate on the credit card is a perfect recipe for a low CIBIL score. Be smart. Opt for a low interest rate card and pay your bills on time.

  • Annual Fee and Other Charges

Truth number three: not all credit card applicants are equal in the eyes of the bank.

Banks offer a card for free to some people. Employees of a big company are offered a credit card for free. The same is true for the important customers of a bank. The rest, however, have to pay an annual fee.

Apart from these two charges, there are several other chargers which are common to all. These include, but are not limited to, the following:

  • Cash Advance Fee (charged for making a cash advance)
  • Balance Transfer Fee (charged when you transfer a balance)
  • Return Check Fee (charged when a payment check is returned from your bank)
  • The charge for making a demand draft from a credit card
  • The charge for requesting a duplicate system

Before applying, learn about all the different charges that are there in the card as well as the exact amount for each type.

  • Rewards and Benefits

Truth number four: rewards are great (especially if you chose a card with a reward scheme which you will use repeatedly).

Check out what rewards and offers the card offers before applying for it. A smart usage of card may allow you to win a lot of benefits through these rewards and offers.

When evaluating a card on this factor, don’t simply go by the number of rewards and offers it offers. Instead, see whether it is offering the ones that are most important for you.

For instance, if the card is offering a healthy cash back benefit on usage at certain petrol pumps and you commute a good amount of kilometers daily using your conveyance, this reward program alone may mean substantial savings for you. On the other hand, a movie buff without a conveyance of his own will find payback points that can be redeemed on online movie booking sites more attractive than the “cash back on fuel” feature.

  • Customer Service

Truth number five: it feels great when you are treated well (the opposite, unfortunately, is equally true).

A credit card is a long-term relationship, or at least that’s how it should be (for frequently closing old cards and getting new ones, besides being a hassle, is not good for your CIBIL score). You are more likely to keep a card for long, if, along with other pluses, the bank’s customer service is of a high standard.

  • The application process

Truth number six: some banks knowingly or unknowingly work against you when you apply for a card (there are many other banks which are not that foolish—go for one of these).

Credit card application process should be smooth. Some banks, however, make their customers go through much red tape before they hand over them a card. Applying for a credit with such a bank, may give headaches, besides proving time consuming. There are many banks with a very swift, uncomplicated approval process. Select such a bank.

Some banks may make getting a new card difficult for only certain customers. For instance, some banks may not give credit cards to or have a lengthy application process for people living on rent with their friends.

  • How easy it is to make payments

Truth number seven: almost every bank offers different payment methods (don’t settle for a bank that has not kept abreast with the changing times)

Almost all banks accept payments from net banking, cash, cheque, and several other ways. However, some banks still don’t offer these standard easy payment facilities or are not supportive when the payment is processed late for no fault of the customer. Needless to say, it is best to stay away from such banks.

Top 6 Credit Cards in India (as per the survey done by a financial blog)

Credit Card Interest Rate Annual Fee/Other Charges Rewards & Offers Customer Service Ease of applying Ease of paying bills Final Rank
Weightage 20% 20% 25% 15% 10% 10%
HDFC  2.89 4.08 3.41 3.83 4.26 3.98 3.65
ICICI 2.61 4.14 3.45 3.55 4.22 3.78 3.55
Citi 2.85 4.36 3.84 4.04 4.43 4.03 3.86
SBI 2.89 3.64 3.27 3.51 4.19 3.42 3.41
Standard Chartered 2.58 3.44 3.58 3.62 4.16 3.82 3.44
HSBC 2.12 3.19 3.23 3.15 3.50 3.46 3.04

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